Sunday

Output Gap

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?

1 comment:

  1. I am not really understand output gap, but I know that the problem of positive output gad is inflation,and the negative output gap is umployment

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