Output gap
MacroDefinition
Difference between actual GDP and potential GDP (the level the economy could produce at full employment without inflation). Positive gap (overheating) usually means inflation building; negative gap (slack) means inflation falling.
Hard to measure in real time — potential GDP is unobservable, only estimated. Output gap estimates get heavily revised after the fact.
Hard to measure in real time — potential GDP is unobservable, only estimated. Output gap estimates get heavily revised after the fact.