Potential GDP Is the Maximum Amount of Economic Output an Economy

question 36

Multiple Choice

Potential GDP is the maximum amount of economic output an economy can sustain at any moment without

• A) causing frictional unemployment.
• B) raising unemployment levels.
• C) decreasing the inflation rate.
• D) increasing the inflation rate.

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Definitions:

Perfect Competition

Perfect competition is a market structure characterized by a large number of small firms, homogeneous products, and easy entry and exit from the market.

Consumer

This defines an individual who purchases goods and services for personal use, driving demand in the market.

Price

The monetary charge expected, imposed, or given in settlement for something.

Price Takers

Market participants who accept the prevailing market price without having the influence to alter it.