Talk:Output gap

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I note that the relation described in the text is at odds with the chart to the right. The chart would seem to indicate that we are currently in an expansionary phase, which is clearly not the case. It appears that the GDP gap is misspecified in the text.

Good catch. I went with the CBO's defintion of output gap as "the difference between actual and potential GDP" [1] and changed the formula to reflect this specification.--Bkwillwm (talk) 04:11, 15 April 2009 (UTC)[reply]

The explanation of the output gap still contains discrepencies. The formula shows Actual minus Potential, while the paragraph says the output gap is Y* - Y (potential GDP minus actual GDP). It seems that the formula at the base of the section is correct, as a negative gap should indicate a recession. —Preceding unsigned comment added by 216.184.116.71 (talk) 19:33, 17 June 2009 (UTC)[reply]

I switched the text to make it consistent with the formula. I've seen output gap expressed both ways, but obviously it should be consistent within the article.--Bkwillwm (talk) 02:25, 18 June 2009 (UTC)[reply]

Negative answer = Recession and Positive answer = Expansionary ?

I believed a negative answer which occured consistently over a period of time would be defined as a recession, whereas a positive answer would be the economy expanding, however the article did give the opposite answer until I edited it. I believe what is true because of this source I cite: http://tutor2u.net/blog/index.php/economics/comments/revision-the-output-gap/

Output gap can be expressed both ways, but it looks like the article was standardized so that positive was recessionary and negative expansionary. I think the CBO and IMF use this setup, and they are better sources to rely on than tutor2u.--Bkwillwm (talk) 10:51, 26 June 2009 (UTC)[reply]

Sorry, but I have to disagree there, the Tutor2U article I cited makes use of the IMF definition, where it can be clearly seen under the "UK output gap", in the early 1980s it mentions a recession and the graph compliments it by having the bars in the negative region indicating a negative output gap (actual < potential therefore will give a negative answer for the output gap).

I also cite the following other sources:

http://www.econbrowser.com/archives/2009/01/cbos_projected.html <-- uses CBO

http://www.frbsf.org/publications/economics/letter/2009/el2009-19.html <--again reinforcing negative figure=recession

http://www.nytimes.com/2009/01/09/opinion/09iht-edkrugman.1.19226613.html

http://www.bankofcanada.ca/en/backgrounders/bg-p5.html

All the writings I've read so far give the output gap definition in the context the sources give, except for wikipedia. This has caused a lot of confusion for me as I'm a beginner in economics, could you please actually confirm whether I am actually correct. I don't think it's possible for the output gap to be "expressed in both ways" unless you change the formula. thanks

Sorry for dismissing your edit. The article has been edited often by different people using different formulas that have led to it being inconsistent. I thought it was OK before you made your edit, so I reverted it without paying attention.--Bkwillwm (talk) 03:38, 29 June 2009 (UTC)[reply]