GDP Gap
Definition
The difference between a country's potential gross domestic product and its actualized gross domestic product for the specified time interval. Potential GDP is an economy's maximum, ideal production with high employment across all sectors and maintaining currency and product price stability.
The Actual GDP is a country's 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 country's unemployment rate coupled with business and government inefficiencies.
GDP Gap = Potential GDP - Actual GDP
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