Definition of GDP Gap:
GDP gap is the forfeited output of a country's economy resulting from the failure to create sufficient jobs for all those willing to work. GDP gap is represented as the difference between actual GDP and potential GDP as represented by the long-term trend. A gross domestic product (GDP) gap represents production and value that is irretrievably lost due to a shortage of employment opportunities.
A GDP gap can be positive or negative. It is calculated as:.
The difference between a countrys potential gross domestic product and its actualized gross domestic product for the specified time interval. Potential GDP is an economys maximum, ideal production with high employment across all sectors and maintaining currency and product price stability. The Actual GDP is a countrys measured output at any interval. Since the Actual GDP will rarely reach the Potential GDP, the GDP gap is considered a measure of wasted potential output due to a countrys unemployment rate coupled with business and government inefficiencies.
GDP Gap = Potential GDP - Actual GDP.
How to use GDP Gap in a sentence?
- The GDP gap created the idea that inefficiencies may exist in the countrys economic trading model so this was discussed during the meeting.
- The USAs GDP GAP over the specified quarter showed the same, continual increase as seen year after year, for the past decade, and no improvement.
- You need to notice if there are any irregularities in the GDP gap and try to figure out a way to fill in the holes.
Meaning of GDP Gap & GDP Gap Definition