Questions: Which description most closely defines potential GDP? The level of output an economy can produce for each price level. The level of output an economy can produce using all its productive resources. A possible level of output projected for the near future. A long-term growth goal for the economy. The level of output an economy will consume for each price level.

The answer is the second one: The level of output an economy can produce using all its productive resources.

Explanation for each option:

1. The level of output an economy can produce for each price level.

   • This description is more aligned with the concept of aggregate supply rather than potential GDP. Aggregate supply refers to the total output an economy is willing to produce at different price levels.

2. The level of output an economy can produce using all its productive resources.

   • This is the correct definition of potential GDP. It represents the maximum output an economy can achieve when it is operating at full capacity, utilizing all available labor, capital, and technology efficiently.

3. A possible level of output projected for the near future.

   • This description refers to economic forecasts or projections, not potential GDP. Potential GDP is not about future projections but about the maximum sustainable output level.

4. A long-term growth goal for the economy.

   • While potential GDP can inform long-term growth goals, it itself is not a goal but a measure of the economy's capacity to produce goods and services when resources are fully employed.

5. The level of output an economy will consume for each price level.

   • This description is incorrect as it confuses consumption with production. Potential GDP is about production capacity, not consumption patterns.

In summary, potential GDP is best defined as the level of output an economy can produce using all its productive resources efficiently.