In economics, potential output (also referred to as "natural real gross domestic product") refers to the highest level of real Gross Domestic Product output that can be sustained over the long term. The existpenisof a limit is due to natural and institutional constraints. If actual GDP rises and stays above potential output, then (in the absence of wage and price controls) inflation tends to increase as demand exceeds supply. This is because of the limited supply of workers and their time, capital equipment, and natural resources, along with the limits of our technology and our management skills. Graphically, the expansion of output beyond the natural limit can be seen as a shift of production volume above the optimum quantity on the average cost curve. Likewise, if GDP is below natural GDP, inflation will decelerate as suppliers lower prices to fill their excess production capacity. Face-to-face trading interactions among on the New York Stock Exchange trading floor In the social sciences, economics is the study of human choice behavior and how it effects the production, distribution, and consumption of scarce resources. ... In economics, the distinction between nominal and real numbers is often made. ... IMF 2005 figures of GDP of nominal compared to PPP. A regions gross domestic product, or GDP, is one of the several measures of the size of its economy. ... The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ... Supply has a number of meanings: In economics, supply is the aggregate amount of any material good that can be called into being at a certain price point; it one half of the equation of supply and demand. ... It has been suggested that Techie be merged into this article or section. ... Management characterizes the process of leading and directing all or part of an organization (often a business) through the deployment and manipulation of resources (human, financial, material, intellectual or intangible). ... Marginal cost is a term in economics. ...

Potential output in macroeconomics corresponds to one point on the production possibilities frontier (or curve) for a society as a whole seen in introductory economics, reflecting natural, technological, and institutional constraints. In economics, the production possibility frontier (the PPF, also called the production possibilities curve (PPC) or the “transformation curve”) is a graph that depicts the trade-off between any two items produced. ...

Potential output has also been called the "natural gross domestic product." If the economy is at potential, the unemployment rate equals the NAIRU or the "natural rate of unemployment." Natural gross domestic product (natural GDP) is defined as the optimal production capacity of a territorys economy given natural and institutional constraints. ... An 1837 political cartoon about unemployment in the United States. ... The term NAIRU is an acronym for Non-Accelerating Inflation Rate of Unemployment. ... -1...

Generally speaking, most central banks and other economic planning agencies attempt to keep GDP at or around natural GDP level. This can be done in a number of ways: the two most common strategies are expanding or contracting the government budget (fiscal policy), and altering the money supply to change consumption and investment levels (monetary policy). Fiscal policy is the economic term which describes the actions of a government in setting the level of public expenditure and how that expenditure is funded. ... The examples and perspective in this article or section may not represent a worldwide view. ... Monetary policy is the government or central bank process of managing money supply to achieve specific goals—such as constraining inflation, maintaining an exchange rate, achieving full employment or economic growth. ...