Question

The term potential output refers to:
a. The quantity of output that would be produced if every member of the labor force worked 40 hours per week
b. The quantity of output produced when the price level is the same as firms and workers expected when they agreed on input prices and wages
c. The quantity of output produced at the intersection of the AD and AS curves
d. The maximum possible output for an economy

Answer 1

Answer: Option D

Explanation: As per the subject matter of economics potential output can be defined as the total value of product and services produced in an economy in respect of real GDP terms. It is that level of GDP that can be sustained over the long period of time.

From the above explanations we can conclude that option D is correct.