Potential Real GDP output at full employment

Definition

Potential Real GDP output at full employment refers to the maximum level of production an economy can achieve when all resources are fully utilized, including labor, capital, and technology.

Analogy

Think of a car engine running at its maximum capacity without any issues or limitations. It represents the economy operating at its highest level of productivity and efficiency.

Related terms

Aggregate Supply: The total amount of goods and services that producers are willing and able to supply in an economy.

Labor Force Participation Rate: The percentage of the working-age population that is either employed or actively seeking employment.

Productivity: The measure of how efficiently inputs (such as labor and capital) are used to produce outputs (goods and services).