2.5.2 output gaps

define real GDP

value of goods and services produced in an economy over time taking into account inflation

why does gdp grow in the long run

because of technological advancements

define negative output gap

when an economy is not using its resources effectively enough

define positive output gap

when an economy is producing over its potential growth because it is overusing its resources

why does an economy sometimes never fully recover from a recession

early retirees

redundants who never go back to work

not replenishing capital that was cut back on