Economics Aggregate Demand And Supply Questions
The output gap refers to the difference between the actual level of output in an economy and its potential level of output. It is a measure of the underutilization or overutilization of resources in an economy. A positive output gap indicates that the economy is operating above its potential level of output, leading to inflationary pressures, while a negative output gap suggests that the economy is operating below its potential level of output, indicating a recessionary gap.