Output gap
The output gap is the difference between an economy's actual output, otherwise known as gross domestic product (GDP), and what it would be if that country's industries were working flat out.
The output gap is the difference between an economy's actual output, otherwise known as gross domestic product (GDP), and what it would be if that country's industries were working flat out. The bigger the gap, the less scope businesses have to raise prices.
This means less chance of inflation picking up - indeed, prices could actually fall. But measuring output gaps can be tricky. That's because in a deep recession, many firms cut costs by mothballing or completely shutting down some of their less profitable spare capacity. This curbs downward price pressures.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Redundancy on the rise – how to manage a sudden drop in incomeUnemployment and redundancies are higher than a year ago, new figures show. We look at how to protect your finances if you face a sudden loss of income.
-
What is the ideal time to spend on the property market? How you could risk losing thousandsTime on the housing market matters – get an offer too quickly or too slowly and you’ll often find you have to settle for less than the asking price. What is the ideal time for a property to spend on the market?
