Potential output is defined as:
A) the amount of total output if all inputs were utilized at their long-run, sustainable levels.
B) what an economy produces when it is at capacity.
C) the current level of output.
D) the amount of output where inflation is zero.
E) the level of output when unemployment is 10 percent.

Question

Quizplus · Accepted Answer

Potential output is the amount of total output that an economy can produce when all inputs are utilized at their long-run, sustainable levels. It is not necessarily the same as the current level of output or the level at which inflation is zero or unemployment is at a certain percent.

Potential Output Is Defined As