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I don’t assume that macOS virtualization is advanced enough to support memory ballooning, or is that not what you’re referring to?

Edit: I stand corrected!

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I don't assume anything either, but a single Google search is enough to dispel that [1]

[1] https://developer.apple.com/documentation/virtualization/vzv...

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macOS is generally pretty amazing at efficient memory usage and VM (virtual memory subsystem) handling. So even a 8GB machine can run pretty impressive workloads without having the user think the machine is underpowered.
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Not really. Larger page sizes mean more potential for wasted memory and it has had a long standing memory leak in some core component to where even Calculator can cause an OOM event.
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GP is pretty accurate in my experience. Up until last year I was still running an Intel MacBook Pro with 8GB of RAM and successfully multitasked with Blender, Illustrator, Unity, VS Code, and Firefox quite often. The math doesn't make sense, but all stayed responsive even with frequent hops between them. The only OOM events I ran into were memory leaks from Firefox, I believe from an extension.
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There's nothing particularly interesting about that. Linux distro-of-your-choice can run the equivalents fine, as can Windows.

Browse /r/macos if you dare to wade into the uninformed cesspool; it's full of OOTB apps causing OOMs (among 3rd party apps) with the past at least two major versions of macOS.

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What will that help with if the host and guest combined need > physical ram?
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If guest memory can be reclaimed, it doesn't need to be paged to disk once you hit RAM contention. It's mostly saving accounting overhead, but it'll have some effect on latency, which you're more likely to perceive under contention.
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