Economic capacity is usually less than physical capacity which is the maximum output that can be physically produced under a given set of resource AIG stock and technology constraints. Some analysts have challenged the view that productive resources are becoming so scarce that higher inflation is a danger. This challenge partly turns on whether the capacity utilization rate, which measures the percent of manufacturing capacity currently in use, is a reliable indicator of inflationary pressures. Most economic forecasters believe
inflationary pressures build after capacity utilization rises above a certain level. Some analysts have claimed, however, this historical relationship is no longer valid because the economy has become more open, allowing imported goods to relieve any shortage of domestic capacity. Some analysts also
have argued that manufacturing capacity shortages will not be a problem in the foreseeable future because of rapid technological progress and strong business investment.