Potential real GDP is defined as:

A. The macro equilibrium.
B. The quantity of output that the economy can produce when it is at full employment of its labor and physical capital.
C. The quantity of output that the economy can produce when it is above the natural rate of unemployment.
D. The quantity of output that the economy can produce when it is at less than potential employment of its resources.

Question

18-07-2024
Social Studies

Answered

Potential real GDP is defined as:

A. The macro equilibrium.
B. The quantity of output that the economy can produce when it is at full employment of its labor and physical capital.
C. The quantity of output that the economy can produce when it is above the natural rate of unemployment.
D. The quantity of output that the economy can produce when it is at less than potential employment of its resources.

Answer :

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GinnyAnswer GinnyAnswer · Answer 1 · 2024-07-18T17:17:25-04:00

Final answer:

Potential output is the level of output an economy can achieve when all resources are fully employed, representing full employment and zero cyclical unemployment.

Explanation:

Potential output, also known as natural level of real GDP, is the level of output an economy can achieve when labor is employed at its natural level and capital goods are fully utilized. It represents the amount of real GDP an economy could produce if all resources are fully employed. When an economy operates at its potential GDP, it is at full employment, having zero cyclical unemployment.

Learn more about Potential output and full employment in economics here:

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