When an economy is producing its potential output, which of the following is true?
A) The price level is higher than that expected by workers.
B) The nominal wage is equal to the real wage.
C) The unemployment rate is about 14 percent.
D) The economy is producing its maximum sustainable output.
E) The actual price level is less than the expected price level.

Question

Quizplus · Accepted Answer

When an economy is producing its potential output, it is operating at its maximum sustainable output, meaning it is utilizing its resources efficiently without overheating the economy or causing inflation to spike. This does not necessarily mean that the nominal wage equals the real wage, that the price level is higher or lower than expected, or that the unemployment rate is at any specific percentage.

When an Economy Is Producing Its Potential Output, Which of the Following