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Real output and potential output

What is the difference between real output and potential output?

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The real output is the combined value of the production of goods and services in a country, measured in some inflation-adjusted unit (for example, in equivalent dollars of year 2000), so as to not confuse an actual increase in ...

Solution Summary

This solution explains what both real output and potential output is, explaining their differences using international examples and also explains the consequences of each.