Which term is another common name for potential output?

Which term is another common name for potential output?

• A. Real GDP.
• B. Actual GDP.
• C. Nominal GDP.
• D. Potential output.

Answer: (D)

Potential output is the level of economic production that the economy can sustain over the long run with normal use of its resources, without generating inflationary pressure. In many texts this concept is called potential GDP, and the term used in the question is another common label for the same idea. So the best choice is the option that uses the same idea with different wording. The other terms describe actual or price-level measures rather than the economy’s capacity: Real GDP is inflation-adjusted actual production, Actual GDP is the realized level of output, and Nominal GDP is current-price output without adjusting for inflation.

Potential output is the level of economic production that the economy can sustain over the long run with normal use of its resources, without generating inflationary pressure. In many texts this concept is called potential GDP, and the term used in the question is another common label for the same idea. So the best choice is the option that uses the same idea with different wording.

The other terms describe actual or price-level measures rather than the economy’s capacity: Real GDP is inflation-adjusted actual production, Actual GDP is the realized level of output, and Nominal GDP is current-price output without adjusting for inflation.