Which of the following is a true statement about potential output?
A) The concept of potential output might be thought of as the maximum sustainable output of the economy under normal circumstances.
B) Actual output cannot exceed potential output, even during a boom.
C) When the actual rate of unemployment exceeds the natural rate, the actual output of the economy will rise above its potential.
D) Potential output represents the absolute maximum level of production.

Question

Quizplus · Accepted Answer

Potential output is defined as the maximum sustainable output that an economy can produce under normal circumstances. It is not an absolute maximum level of production, rather, it accounts for available resources and technological capabilities.

Which of the Following Is a True Statement About Potential