Answer to Question #139050 in Macroeconomics for John

Question

Is too much or too little real output (output out of equilibrium) desirable? Why or why not?

Answer 1

Too much real output or the output of equilibrium is desirable for an economy. Any increase in real output translates into economic growth, which in other words refers to an increase in the real GDP. Economic growth is denoted by a corresponding increase in an economy's national output, income, and expenditure values. Increased real output is beneficial because it results in higher or improved standards of living. High real output results in higher real incomes, as well as, the country's ability to devote more resources in the provision of public goods, such as sanitation, health care, and education. Several benefits of economic growth accrue due to an increase in real incomes, which is a consequence of increased real output, and they include; reduced poverty, improved government finances, increased life expectancy, and generally, improved standards of living. Therefore, too much real output is always desirable for an economy.