The economy's potential output is
A) the maximum output that could be achieved temporarily during a time of economic boom.
B) the minimum output that could be achieved during a recession.
C) present when 100 percent of the labor force is employed.
D) the maximum sustainable output of the economy given its resources.

Question

Quizplus · Accepted Answer

The economy's potential output is the maximum sustainable output of the economy given its resources, which means that it is the highest level of output that can be maintained over a long period without generating inflationary pressures or reducing the growth potential of the economy. It is not related to economic boom, recession or employment rate.

The Economy's Potential Output Is