Output Gaps

Question 1

what is actual growth?

Answer 1

caused by an increase in AD, percentage increase of country’s GDP

Question 2

long- term trend in growth rates

Answer 2

caused by an increase in AS,

Question 3

What’s a negative output?

Answer 3

Occurs when the actual level of output is less than the potential level of output
- puts a downward pressure on inflation, labour and capital aren’t used to its full productive potential

Question 4

Long - term trend in growth rates

Answer 4

It’s caused by increase in AS, it’s the long run expansion of the productive potential

Question 5

What is a positive output gaps?

Answer 5

Occurs when the actual level of output is greater than the potential level of output

Question 6

Causes of a positive output gap?

Answer 6

• resources being used beyond the normal capacity
  -if labour works overtime
  -if productivity is growing
• puts upward pressure on inflation