Potential GDP - domestic product of the state, which can be provided to the maximum extent with the full use of available resources.This state is called full employment.There is another concept - the real GDP for the formation of producers who created and sold the required number of products within a specified time at different price levels.In the analysis of macro-economic indicators decided to allocate long-term and short-term periods.Thus, the behavior of economic agents in the long run can be described by the classical model.The free market without government intervention is automatically ensured the use of resources in production, which leads to the achievement of potential GDP.
magnitude of potential GDP is determined depending on the available technologies and resources, however, can not depend on the price level.That is why the long-term aggregate supply curve is vertical nature.
Potential GDP obeys the neutrality of money.For example, the vertical direction of the curve indicates the degree of security issue on the level of the GDP by the market and competition in the long term.The level of prices can be different and depend on the amount of money in the economy.And the other side of this economic law - if there is a high monetary emission traces the high prices and long-term planning in the money supply has an impact on prices and output.
With increasing amounts of resources in the economy traces the development of technical progress and, consequently, increases the potential GDP, and its curve on the graph should move to the right.But with the reduction in resources or technical regression it should be the other way around.
significant number of economists believe that GDP (actual and potential) can display in macroeconomics long term.The deviations of the first type domestic product from the second quite successfully eliminated by the market.
However, modern economists infer the existence of a brief period (for example, can serve as a quarter), in which the classical approach to the neutrality of money can not operate.In other words, any change in the volume of money supply have a significant impact on the price level, and the potential GDP.With this approval, a new concept - a short-term GDP, to show that the dynamics of the aggregate supply curve is not vertical, but rather horizontally located.
This curve shows the possibility of increasing the capacity of economic entities of production at a certain price level.This fact is confirmed by the presence of a noticeable lag of actual GDP from its potential level.In other words, the domestic economy is not in full force.
