What does potential GDP represent in terms of aggregate output?

Aggregate Supply, Unemployment And Inflation MCQs for PPSC, FPSC, NTS, and Pakistan government job tests. Select an option below, then read the explanation.

Aggregate Supply, Unemployment And Inflation

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Subject
Aggregate Supply, Unemployment And Inflationeconomics-mcqs › aggregate-supply-unemployment-and-inflation
Published
3 Jun 2019
Last updated
28 May 2026

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Explanation

Potential GDP is defined as the total output an economy can sustain over the long run without triggering inflationary pressures. It reflects the economy's capacity to produce goods and services at a stable price level, distinguishing it from short-term fluctuations caused by unemployment variations or inflation rates.

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