# Output Gap

*Macro & Economy — Finicade finance glossary*

The gap between what an economy is producing and what it could produce at full stretch. A positive gap fuels inflation; a negative one signals slack and unemployment — a key gauge for policymakers.

**Also known as:** potential-output

**Related terms:** [GDP (Gross Domestic Product)](https://finicade.com/glossary/gdp), [Phillips Curve](https://finicade.com/glossary/phillips-curve), [NAIRU](https://finicade.com/glossary/nairu)

**Taught in:** Macro & Markets — IS-LM-PC: The Road Back to Normal

Source: https://finicade.com/glossary/output-gap