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POTENTIAL REAL GROSS DOMESTIC PRODUCT: The total real output (real gross domestic product) that the economy could produce if resources are fully employed. In other words, the economy is operating ON the production possibilities frontier. Full employment is generally indicated by achieving what is termed the natural unemployment rate, which is an unemployment rate in the neighborhood of about 5%. If the economy is at full employment then actual gross domestic product is equal to potential gross domestic product and the actual unemployment rate is equal to the natural unemployment rate. The macroeconomy is thus living up to its potential, at least in terms of producing wants-and-needs satisfying goods and services.

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MINIMUM EFFICIENT SCALE: The quantity of production that places a firm at the lowest point on its long-run average cost curve. The minimum efficient scale is highly prized by economists because it achieves production of a good at the lowest possible opportunity cost. In other words, it's not possible to produced a good any cheaper than at the minimum efficient scale. At this quantity the production involves foregoing the least amount of other goods.

     See also | production | long-run average cost curve | opportunity cost | economies of scale | increasing returns to scale | diseconomies of scale | decreasing returns to scale |


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MINIMUM EFFICIENT SCALE, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: June 28, 2022].


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AGGREGATE SUPPLY INCREASE, SHORT-RUN AGGREGATE MARKET

A shock to the short-run aggregate market caused by an increase in aggregate supply, resulting in and illustrated by a rightward shift of the short-run aggregate supply curve. An increase in aggregate supply in the short-run aggregate market results in a decrease in the price level and an increase in real production. The level of real production resulting from the shock can be greater or less than full-employment real production.

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