output gap

This term is a specialized macroeconomic indicator used primarily by economists, central bankers, and policy analysts. It describes the discrepancy between what an economy is actually producing and what it could produce if all resources were used efficiently. A positive gap suggests the economy is overheating, while a negative gap indicates underutilized capacity and unemployment.

Because it is a technical term of art, it is rarely used in casual conversation. It typically appears in formal reports, financial journalism, and academic papers regarding monetary policy. It is almost always paired with verbs like close, widen, or narrow to describe the movement of the economic state toward or away from full potential.