ECON 545 Week 6 Discussion; Monetary and Fiscal Policies

Week 6 Discussion Monetary and Fiscal Policies An economy is assumed to be operating at full capacity when its real GDP (what the economy produces) equals its potential GDP (what the economy would produce if all factors of production are used). When the economy is producing at full potential, everyone who wants to work can find a job, because every worker who enters the workforce will produce what he or she will eventually consume with the income. In addition, and when the economy is producing at full capacity, unemployment rates in the economy represent the natural rate of unemployment (onl