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GDP Gap

   Also found in: Encyclopedia, Wikipedia 0.01 sec.
GDP Gap
The economic growth that an economy would experience if all persons willing to work had jobs. The GDP gap represents growth that can never happen because the economy has not allocated jobs to all willing workers. This can occur for a number of reasons, including excessive government regulation and corporate fear for future earnings. See also: Unemployment rate, Full employment.


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Most economists look at a whole slew of data--from GDP gaps to commodity price trends--before forming opinions about inflation trends.
With this projection in mind, the recovery bill pours a bit less than 2 percent of GDP into new spending per year, plus some tax cuts, for two years, into a GDP gap estimated to average 6 percent for three years.
However, it seems that a number of shocks are mutually correlated (eg, GDP gap in Germany, interest rate in the Euro zone, and the USD/EUR exchange rate) and the model can be reduced to save degrees of freedom from already short series for countries under study.
 
 
 
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