If the economy is at potential output,the price level can continue to increase.

Question

Quizplus · Accepted Answer

If the economy is at potential output, it means that it is producing goods and services at its maximum capacity. This also means that there is full employment and there are no idle resources. As demand for goods and services increases, prices can continue to rise as supply struggles to keep up with demand. Therefore, if the economy is at potential output, the price level can continue to increase.

If the Economy Is at Potential Output,the Price Level Can