Output Gap
The output gap is a measure of the difference between the actual output of an economy and its potential output. It is used to gauge the level of economic activity and to assess the degree of slack in the economy. The output gap is calculated by subtracting the actual output from the potential output. If the output gap is positive, it means that the economy is operating above its potential output, and if it is negative, it means that the economy is operating below its potential output.
History of the Output Gap
The concept of the output gap was first developed by economist Arthur Okun in the 1960s. Okun argued that the output gap was a useful measure of the degree of slack in the economy, and that it could be used to assess the level of economic activity. Since then, the output gap has become an important tool for economists and policy makers to gauge the state of the economy.
Comparison of Output Gap
| Year | Actual Output | Potential Output | Output Gap |
|---|---|---|---|
| 2020 | 100 | 120 | -20 |
| 2021 | 110 | 120 | -10 |
| 2022 | 130 | 120 | 10 |
Summary
The output gap is a measure of the difference between the actual output of an economy and its potential output. It is used to gauge the level of economic activity and to assess the degree of slack in the economy. The output gap is calculated by subtracting the actual output from the potential output. If the output gap is positive, it means that the economy is operating above its potential output, and if it is negative, it means that the economy is operating below its potential output. For more information about the output gap, you can visit websites such as the International Monetary Fund, the World Bank, and the Federal Reserve Bank of St. Louis.
See Also
- Gross Domestic Product (GDP)
- Unemployment Rate
- Inflation Rate
- Interest Rate
- Balance of Payments
- Exchange Rate
- Monetary Policy
- Fiscal Policy
- Business Cycle
- Economic Growth
