Glossary · Macro · Aggregate demand and supply

Output gap

The distance between actual real GDP and potential output. A negative gap means the economy is producing below what it could, a positive gap means it is running above its sustainable pace. On the AD-AS graph it is the horizontal distance between the short-run equilibrium and LRAS.

Practice reading the aggregate demand and aggregate supply graphTaught in: Macro Equilibrium

Related terms

Recessionary gapInflationary gapPotential output

More from aggregate demand and supply

Aggregate demand (AD)Business cycleLong-run aggregate supply (LRAS)Macroeconomic equilibriumSelf-correction

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