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Define potential output (or potential GDP). How this concept is used by economists to meet the...

Define potential output (or potential GDP). How this concept is used by economists to meet the goals of macroeconomics?

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Expert Solution

  • Refers to Natural Gross Domestic Product.
  • Highest level of GDP.
  • Sustained over long term.
  • Economic out look.
  • Level of out put.
  • Economy can produce.
  • At a constant Inflation.
  • An out put Economy would produce .
  • High rate of capital and labor resources.
  • The concept potential out put can be described as
  • What an Economy can produce.
  • Its resources such as work force,
  • Technology and others are fully utilized.
  • An Economy that produces
  • Its potential out put
  • Can be called as full Employment.
  • It is used by policy makers.
  • To estimate inflation.
  • Essential for government operations.
  • Monetary policy also have an effect on business cycle.
  • When excess demand are evident,
  • Resources are abundant.
  • They are responsible for finding out factors
  • Responsible for unemployment.
  • Used to derive indicators.
  • Potential out put growth reflects development.
  • Linked to Factors such as.
  • Labour market trends,technological Innovations.
  • A crisis can reduce potential out put in the short and medium term
  • Through impact on investment.

Rahul Sunny answered 2 years ago
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