Potential GDP Is Defined as the Level of Aggregate Output

question 8

Multiple Choice

Potential GDP is defined as the level of aggregate output at which

• A)there is only cyclical and frictional unemployment, and capital equipment is being used at 100 percent capacity.
• B)all factors of production are employed at their "normal" utilization rates.
• C)the unemployment rate is zero.
• D)there is only cyclical and structural unemployment.
• E)all factors of production are employed at 100 percent capacity.

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Definitions:

Optimal Area

The most advantageous or efficient region or point for a specific activity or condition.

Public Good

A non-excludable and non-rivalrous good that can be consumed by everyone, such as national defense or public parks.

Nonexclusive

A term usually related to goods or services, indicating that they cannot be withheld from individuals who don't pay for them.

Marginal Social Cost

The total cost to society, including both private and external costs, of producing one additional unit of a good or service.