Potential output - Actual output - Actual output VS Potential Output

5 important questions on Potential output - Actual output - Actual output VS Potential Output

What does actual output not always equal?

Potential output can differ from actual performance due to various factors.

What can cause the economy to underperform?

High unemployment and unused resources are contributing factors to underperformance.

What may happen when overworking labor or capital?

The economy can temporarily produce more, but sustainability is an issue.
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What occurs when actual output is near potential output?

The economy experiences tight labor markets and increased inflation risks.

What do policymakers monitor closely?

They watch actual output and potential output to inform economic decisions.

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