What is GDP GAP?

A country’s potential gross domestic product versus its actual, realized gross measured over a specified time period. Actual GDP is perennially less than Potential GDP. This difference is stated as a measure of wasted potential output. The blame for the waste is typically put on a country’s unemployment rate, tied to business and government inefficiencies. Actual GDP is a country’s time-bound measure of its output. Potential GDP is an ideal, zero unemployment, product price stability, strong currency, and maximum production.

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