Potential output changes only when:
A) the price level changes.
B) government fiscal policy changes.
C) aggregate demand changes.
D) supply conditions change.

Question

Quizplus · Accepted Answer

Potential output refers to the level of output an economy can achieve when it is operating at full capacity, without causing inflation. It changes with alterations in the supply side of the economy, such as changes in technology, labor force, capital stock, or natural resources, rather than changes in demand or short-term fiscal or monetary policies.

Potential Output Changes Only When