The accurate calculation of potential output is important because:
A) it is necessary to calculate the size of short-run output fluctuations.
B) we need it to find inflation rates.
C) policymakers can make serious errors about the state of the economy.
D) without it, we cannot determine long-run growth rates.
E) All of these answers are correct.

Question

Quizplus · Accepted Answer

The accurate calculation of potential output is important for all of the reasons given in the answer choices. It is used to determine the size of short-run output fluctuations, find inflation rates, allow policymakers to make informed decisions about the state of the economy, and determine long-run growth rates. Therefore, all of the answer choices are correct.

The Accurate Calculation of Potential Output Is Important Because