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


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