Potential output is the level of aggregate output that can be sustained in the long run without
A) unemployment.
B) government regulation.
C) taxes.
D) inflation.

Question

Quizplus · Accepted Answer

Potential output refers to the level of output that an economy can sustain over the long term without generating inflation. It does not imply the absence of unemployment, government regulation, or taxes, but rather a state where resources, including labor, are utilized in a way that does not lead to increasing price levels.

Potential Output Is the Level of Aggregate Output That Can