Question

Potential GDP refers to the level of ___________ Select one: a. Nominal GDP in the long run. b. Nominal GDP in the short run. c. Real GDP in the long run. d. Real GDP in the short run.

Answer 1

Answer:

c. Real GDP in long run

Explanation:

Potential GDP refers to the level of real GDP in long run.

Answer 2

Answer: Real GDP in the long run.

Explanation:

Potential Gross Domestic Product(GDP) or Full employment GDP is a theoretical GDP level that an economy would attain full employment is reported. Potential GDP is the GDP level where there is zero unemployment in the economy. It is the point where there is Pareto efficient, i.e., when there cannot be an increase in the aggregate output in the economy without an increase in the inputs level.

Potential GDP is the maximum attainable production level in an economy and its calculation relies on the assumption of a full employment. It is the highest level of the long run GDP that can be maintained with the technology level. Generally, full employment GDP refers to real GDP. The potential GDP is measured in terms of real goods and services.