The chart on the left shows the output gap.
But...do we want an output gap? How do we estimate the potential output?
How do we calculate current output - how does the government know what I am 'outputting'?
What about people who do not 'produce' - waitresses, bankers, bus-drivers, street cleaners...teachers?
Is a 'positive' output gap good for the economy? Is a negative output gap, 'bad'?
What do we do if there is a gap that is getting wider?
What if our figures for 'potential' are wrong?
MCQ Walkthrough 9708/32 (India) (Q21 - Q30)
8 months ago