Figure 1-2

-The natural level of real GDP is that level of
A)real GDP at which the price level will continue increasing.
B)nominal GDP at which the price level will remain constant.
C)real GDP at which there is no tendency for inflation to accelerate or decelerate.
D)Nominal real GDP at which the price level will continue to decrease.

Question

Figure 1-2
 
-The natural level of real GDP is that level of
A)real GDP at which the price level will continue increasing. 
B)nominal GDP at which the price level will remain constant. 
C)real GDP at which there is no tendency for inflation to accelerate or decelerate. 
D)Nominal real GDP at which the price level will continue to decrease.

Quizplus · Accepted Answer

The natural level of real GDP is also known as potential GDP, which is the level of output the economy can produce when all resources are fully employed. At this level, there is neither a tendency for inflation to accelerate nor decelerate, which means that it is consistent with price stability in the long run.

Figure 1-2 -The Natural Level of Real GDP Is That Level of Is