difference between the actual level of GDP and its estimated potential level

how is an output gap expressed?

percentage of the level of estimated potential output

where actual GDP is above potential GDP, sign of possible excess AD

where the economy has a large margin of spare capacity of factor resources(short run economic growth reduces amount of spare capacity & reduce gap)

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Economics 2.5.2

Economics- Edexcel 2.5.2

Term	Definition
output gap	difference between the actual level of GDP and its estimated potential level
how is an output gap expressed?	percentage of the level of estimated potential output
positive output gap	where actual GDP is above potential GDP, sign of possible excess AD
negative output gap	where the economy has a large margin of spare capacity of factor resources(short run economic growth reduces amount of spare capacity & reduce gap)