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Newsletter
Minding the Output Gap: What Is Potential GDP and Why Does It Matter?
Potential output is an estimate of what the economy could produce. Actual output is what the economy does produce. If actual is below potential -- a negative output gap -- there is "slack" in the economy. If actual is above potential -- a positive output gap -- resources are fully employed, or perhaps overutilized. This issue of Page One Economics explains how the output gap is useful for checking the health of the economy. It also points out how errors in the estimation of potential real GDP can reduce the effectiveness of policy.
Newsletter
Data Units in FRED®
This Page One Economics Data Primer describes the range of data units available in FRED, including their common use and interpretation, that help reveal the story behind the numbers.
Journal Article
Current Monetary Policy May Be Less Restrictive Than It Seems
Compared with most historical inflationary episodes since the 1960s, the current U.S. inflation cycle features both higher core inflation and a more resilient real economy. This co-movement of prices and real activity suggests monetary policy has not sufficiently reduced demand. We examine the current policy stance and argue that interest rates may indeed be less restrictive than commonly thought. To lower inflation to 2 percent, the Federal Reserve may have to maintain a restrictive policy stance for some time.
Journal Article
A Growth-Accounting Perspective on the Post-Pandemic Economy
Real GDP has increased at a 2.8% annual rate over the past four quarters, much faster than the 2009-20 expansionary period.