Potential GDP is the output that would be produced if the economy was experiencing:
A) No unemployment
B) Free markets and international trade
C) No inflation
D) Full employment

Question

Quizplus · Accepted Answer

Potential GDP is the maximum level of output that can be produced when an economy is utilizing all of its resources, including labor. Full employment is a situation where all available labor resources are being used efficiently, so if there is no unemployment, it means that the economy is operating at full employment and can produce at its potential level. Therefore, option D is the correct answer. The other options may have an impact on the economy, but they are not directly related to potential GDP.

Potential GDP Is the Output That Would Be Produced If