What does potential GDP represent in terms of aggregate output?

Multiple choice question for Aggregate Supply, Unemployment And Inflation. Select an option, then review the explanation below.

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The output achievable only when structural unemployment is eliminatedThe production level reached when unemployment is completely absentThe maximum output level maintainable over the long term without causing inflationThe output sustainable indefinitely if the inflation rate remains at zeroNone of the above

Explanation

Potential GDP is defined as the total output an economy can sustain over the long run without triggering inflationary pressures. It reflects the economy's capacity to produce goods and services at a stable price level, distinguishing it from short-term fluctuations caused by unemployment variations or inflation rates.

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What does potential GDP represent in terms of aggregate output?

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