What is the difference between actual output and and potential output?

Actual Output can be defined as the growth in the quantity of goods and services produced in a country, or in other words the percentage chance in GDP. While Potential Output is the change in the productive potential of a economy over time. 

To put this in simpler terms actual output is growth that has actually happened in real life, while potential output is how much growth the economy could achieve. The difference between actual output and potential output is known simply as the output gap. A positive output gap is when actual GDP is above the productive potential of the economy, while a negative output gap is when actual GDP is below the productive potential of an economy.

Answered by Ben C. Economics tutor

38709 Views

See similar Economics A Level tutors
Illustration of a video tutorial

Need help with Economics?

One to one online tuition can be a great way to brush up on your Economics knowledge.

Have a Free Meeting with one of our hand picked tutors from the UK’s top universities

Find a tutor

Related Economics A Level answers

All answers ▸

Discuss the likely impact of a depreciation of the pound on the UK's economy.


Should the United Kingdom Government rely on market forces to redistribute income and wealth, to make it fairer or intervene to do so?


What factors affect supply of a good or service?


What are the main tools to used to meet the key economic objective of ecomic growth?


We're here to help

+44 (0) 203 773 6020support@mytutor.co.ukContact us
Facebook logoTwitter logoGooglePlus logoLinkedIn logo

© MyTutorWeb Ltd 2013–2021

Terms & Conditions|Privacy Policy