2.5.2 Output gaps

Question 1

How is Actual economic growth measured?

Answer 1

Changes in GDP over time.

Question 2

What is a negative output gap?

Answer 2

When the level of actual GDP is less than potential GDP.
(unemployment in economy)

Question 3

What is a positive output gap?

Answer 3

Actual GDP is greater than estimated potential GDP.

This means resources are working beyond normal capacity IE working overtime.
causes demand pull and cost push inflation.