Potential output is Group of answer choices the level of real GDP that exists when the actual rate of unemployment is zero. the level of real GDP that exists when the economy is experiencing only cyclical and structural unemployment. the level of real GDP that exists when the quantity of labor supplied is equal to the quantity of labor demanded. the level of real GDP that exists when the economy is experiencing only frictional and cyclical unemployment.

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Business

Isaac Mckee

9 September, 12:13

Potential output is Group of answer choices the level of real GDP that exists when the actual rate of unemployment is zero. the level of real GDP that exists when the economy is experiencing only cyclical and structural unemployment. the level of real GDP that exists when the quantity of labor supplied is equal to the quantity of labor demanded. the level of real GDP that exists when the economy is experiencing only frictional and cyclical unemployment.

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Ralph Herring · Answer 1

the level of real GDP that exists when the economy is experiencing only frictional and cyclical unemployment.

Explanation:

Potential GDP output is the highest level of real GDP that an economy can achieve over a sustained period of time and at a constant inflation rate. Potential output is reached when the natural rate of unemployment exists.

Natural rate of unemployment = frictional + structural unemployment

An economy can temporarily reach an output level higher than potential, but it will cause a surge in the inflation rate that will soon lower real GDP.