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Positive and Negative Output Gaps

Study Edexcel Economics output-gap questions by comparing actual and potential output and interpreting AS-AD diagrams, growth data and unemployment.

Syllabus
2019
Course
Economics YEC11
Level
AS

Exam points

  • Define an output gap as the difference between actual output and potential or full-employment output.
  • Identify a negative gap when actual output is below potential and show the shortfall on an AS-AD diagram.
  • Identify a positive gap when actual output exceeds potential and apply trend-growth or GDP data carefully.

2.3.5.4b - distinction between positive and negative output gaps question 1

[Maximum number: 1]

The table shows the annual percentage change in the real GDP of Canada between 2017 and 2019. The long-term trend rate of economic growth for the economy is estimated to be 2.7%.

Table for Question 2.3.5.4b - distinction between positive and negative output gaps question 1 — Edexcel A-Level Economics AS

Which one of the following can be deduced from the table?

A

The positive output gap increased between 2017 and 2018

B

There was a negative output gap in 2018 and 2019

C

There was a positive output gap in 2018 and 2019

D

The negative output gap decreased between 2018 and 2019

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