Potential Gross Domestic Product (Potential GDP)
Potential Gross Domestic Product (Potential GDP) is the level of real Gross Domestic Product that an economy can sustain over the long run without accelerating inflation, given current resources, technology, and institutions.
Example: In quarterly analysis, economists compare real GDP to potential GDP to determine whether the economy is operating near its long-run capacity; a negative output gap suggests underutilized resources.
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