2.5.2: Output Gaps Flashcards
1
Q
What is an output gap?
A
- The difference between the actual level of output and the potential level of output
2
Q
What is a positive output gap?
A
Where the actual output is more than potential output
3
Q
What are the characteristics of a positive output gap?
A
- LRAS is left of the equilibrium
- Unsustainable, as there could be overworking of the factors of CELL ( eg labour is overtime/ exploited)
4
Q
What is a negative output gap?
A
- Where actual output is less than potential output
5
Q
What are the characteristics of a negative output gap?
A
- LRAS is right of the equilibrium
- factors of production are not being used to full potential
- underproduction and under utilisation