Tag Archive for Output Gap

Should We Mind the Gap? New Economic Perspectives

In his May 2011 column, “Is There Really an Output Gap,” CNBC financial blogger John Carney argues that the output gap—the difference between the economy’s potential performance and its actual performance—is a flawed theoretical construct that policymakers should avoid using as a basis for economic policy. Carney presents most of this through a “thought experiment” involving a hypothetical tobacco-based U.S. economy called Tobacco America.