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Key Diagrams - The Output Gap

Level:
A-Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 31 May 2022

In this short revision video we walk through the output gap diagram.

Key Diagrams - The Output Gap

The output gap is a measure of the difference between actual output (Y) and estimated potential output (YP).

A positive output gap means GDP is above the long term trend which might be a sign of rising inflationary pressure

A negative output gap means GDP lies below potential output – this is often the result of an economic downturn which leaves an economy with spare capacity.

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