output gaps Flashcards
1
Q
what is an output gap
A
the difference between real GDP and potential Real GDP
2
Q
negative output gap definition
A
when actual real gdp is less than potential real gdp
3
Q
positive output gap definition
A
when actual real gdp is greater than potential real gdp
4
Q
what are the demand factors which can cause a negative output gap
A
low demand itself
loss of market shares
seasonal variation
5
Q
what supply factors cause negative output gap
A
increased capital not matched by increased demand
improvements in productivity
6
Q
how does a positive output gap sort itself out
A
wages have to rise to attract the unemployed to meet high levels of demand
so sras shifts in reducing the positive output gap
OR
firms require more capital, this boosts LRAS so the economy is operating on the PPC
