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The calculation for the output gap is (Y–Y*)/Y* where Y is actual output and Y* is potential output. If this calculation yields a positive number it is called an inflationary gap and indicates the growth of aggregate demand is outpacing the growth of aggregate supply—possibly creating inflation; if the calculation yields a negative number it is called a recessionary gap—possibly ...
A deflationary spiral is a situation where decreases in the price level lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in the price level. [ 39 ] [ 40 ] Since reductions in general price level are called deflation, a deflationary spiral occurs when reductions in price lead to a vicious ...
The difference between potential output and actual output is referred to as output gap or GDP gap; it may closely track lags in industrial capacity utilization. [ 4 ] Potential output has also been studied in relation Okun's law as to percentage changes in output associated with changes in the output gap and over time [ 5 ] and in decomposition ...
Similarly, deflation could boost same-store sales growth and give the retailer to reinvest in the quality and quantity of products, which was hard to do during the inflationary environment of the ...
The introduction of inflationary expectations into the equation implies that actual inflation can feed back into inflationary expectations and thus cause further inflation. The late economist James Tobin dubbed the last term "inflationary inertia", because in the current period, inflation exists which represents an inflationary impulse left ...
A number of leading economists, including advisers to past U.S. presidents, have coalesced around the view that President-elect Donald Trump's plans to broaden tariffs, cut taxes and curb ...
Inflationary bias is the outcome of discretionary monetary policy that leads to a higher than optimal level of inflation. Depending on the way expectations are formed in the private sector of the economy, there may or may not be a transitory income increase. The term may also refer to the practice of a public debt-ridden nation enacting ...
In economics, the GDP deflator (implicit price deflator) is a measure of the money price of all new, domestically produced, final goods and services in an economy in a year relative to the real value of them.