Productive capacity

Definition

Productive capacity refers to the maximum level of output that an economy can sustainably produce over a given period without putting excessive strain on resources or causing inflation. It is determined by factors such as physical capital (machinery), labor force size/skills, technology advancements, natural resources availability.

Related terms

Capital stock: This term refers to all physical assets used in production - factories, machinery - that contribute to an economy's productive capacity.

Labor force participation rate: It represents the percentage of working-age population actively employed or seeking employment. A higher participation rate means a larger workforce contributing to productive capacity.

Technological advancements: Improvements in technology can boost productive capacity by enabling more efficient production methods or creating new products/services.