It is a theory of macro-economy which describes an economy which does not operate at maximum employment equilibrium. The outcome of a gap of contractionary nature is a low degree of GDP (Gross Domestic Product) than what is observed at complete employment status.

More On This Topic

Link to This Definition
Did you find this definition of CONTRACTIONARY GAP helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary