The potential output of an economy is the level of output produced when the:

A) real wage equals the nominal wage.
B) price level is constant.
C) expected real wage equals the nominal wage.
D) seasonal unemployment rate is zero.
E) expected price level equals the actual price level.

Potential Output

The highest level of real GDP (gross domestic product) that can be sustained over the long term without increasing inflation.

Expected Price Level

The anticipated average level of prices for all goods and services in an economy for a future period, influenced by current and forecasted economic conditions.

Real Wage

The buying capacity of salaries once corrected for inflation, showing the amount of products and services that can be purchased.