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GDP Gap

Definition

The GDP gap or the output gap is the difference between actual GDP or actual output and potential GDP. The calculation for the output gap is Y–Y where Y is actual output and Y* is potential output. If this calculation yields a positive number it is called an inflationary gap and indicates the growth of aggregate demand is outpacing the growth of aggregate supply—possibly creating inflation; if the calculation yields a negative number it is called a recessionary gap—possibly signifying deflation.

Source: Investopedia
This Article has been Edited for Accessibility

GDP Gap

What is 'GDP Gap'

The forfeited output of a country's economy resulting from the failure to create sufficient jobs for all those willing to work.

Explaining 'GDP Gap'

A GDP gap denotes the amount of production that is irretrievably lost. The potential for higher production levels is wasted because there aren't enough jobs supplied.


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