Output Gap Calculator

The output gap is a key economic indicator that shows the difference between the actual GDP and potential GDP as a percentage of potential GDP. This metric helps gauge whether an economy is overperforming or underperforming relative to its potential capacity.

Calculation Formula

The output gap is calculated using the formula:

\[ \text{Output Gap (\%)} = \frac{\text{Actual GDP} - \text{Potential GDP}}{\text{Potential GDP}} \times 100 \]

Interpretation

• A positive output gap indicates the economy is operating above its potential, which can lead to inflation.
• A negative output gap suggests the economy is underperforming, signaling unemployment and unused resources.

This calculator helps in understanding economic conditions and guiding monetary or fiscal policy decisions accordingly.