Potential GDP is the value of real GDP when the economy is at full employment.

Potential GDP is the value of real GDP when the
economy is at full employment.
Because the unemployment rate fluctuates around the
natural unemployment rate, real GDP fluctuates around
potential GDP:
• When the unemployment rate is above the natural
rate, real GDP is below potential GDP.
• When the unemployment rate is below the natural
unemployment rate, real GDP is above potential GDP.

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