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July/August 2009, 
Vol. 91, No. 4
Posted 2009-07-01

The Challenges of Estimating Potential Output in Real Time

by Robert W. Arnold

Potential output is an estimate of the level of gross domestic product attainable when the economy is operating at a high rate of resource use. A summary measure of the economy’s productive capacity, potential output plays an important role in the Congressional Budget Office (CBO)’s economic forecast and projection.