Question

Potential GDP is defined as the maximum quantity that an economy can produce given its existing levels of labor, physical capital, and technology, in the context of its existing market and legal institutions. Potential GDP is also called

Answer 1

potential output or natural GDP

Step-by-step explanation:

Potential gross domestic product (GDP) is the level of output which any economy can produce at a constant inflation rate.

When GDP falls short of that natural limit, it means the country is failing to live up to its economic potential. When GDP exceeds that natural limit, inflation is likely to follow. This is why potential GDP is sometimes referred to as potential output or natural GDP.