Unlocking an Economy’s Maximum Potential Output for Sustainable Growth and Inflation Control

What is the meaning of a Full Potential Output?

The potential output refers to the highest level of real gross domestic product (output) that can be sustained over the long term. It is also referred to as the “natural gross domestic product.”

Full potential output refers to the maximum amount of goods and services that an economy can produce when all available resources, such as labor, capital, and technology, are used efficiently. It is the level of output that an economy can produce without generating inflationary pressure or putting excessive strain on resources.

In simple terms, full potential output is the highest level of output an economy can sustain without causing inflation. This level of output is achieved when all available resources are fully employed, and production is at its maximum capacity. The concept of full potential output is important for policymakers and investors as it provides insight into the health of an economy, and helps to inform decisions about monetary policy, investment, and economic planning.

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