Asked by
Kayvon Brown
on Dec 16, 2024
Verified
Potential output is the amount produced when:
A) firms' and workers' expectations about the price level are realized.
B) the actual price level is higher than the price level expected by workers.
C) firms and workers have the same expectations about the price level.
D) the actual price level remains constant.
E) the actual price level is lower than the price level expected by firms.
Potential Output
The highest level of real gross domestic product (GDP) that can be sustained over the long term without increasing inflation.
Price Level
An indicator reflecting the average prices of goods and services in an economy at a given time, showcasing the cost of living and inflation.
Firms' Expectations
The outlook or anticipations of businesses regarding future economic conditions, sales, and profitability, which can influence their investment and production decisions.
- Understand the idea of potential output and the economy's natural rate of output.
- Understand the impact of disparities between expected and actual price levels on the economy.
Verified Answer
MC
Learning Objectives
- Understand the idea of potential output and the economy's natural rate of output.
- Understand the impact of disparities between expected and actual price levels on the economy.