 |
 |
To my mind the confusion for students comes with the use of capacity. How can an economy produce beyond full capacity? Capacity is the level of output achieved when workers (and machines) are operating normally. Output can rise beyond capacity. How? workers start doing overtime or working extra shifts. For capital normal maintenance procedures are suspended so that output can be raised. Regards Richard Young Business Studies, Economics & ICT Teacher Wood Green School Woodstock Road Witney OX28 1DX Tel 01993 702355 Fax 01993 708662 www.woodgreen.oxon.sch.uk BECTa/Guardian Secondary School Web Site of the Year 2001 [log in to unmask] -----Original Message----- From: For teachers and lecturers interested in curriculum issues affecting the te [mailto:[log in to unmask]]On Behalf Of Simon Foley Sent: 01 November 2001 21:15 To: [log in to unmask] Subject: Re: Output Gap Dear all Geoff is completely correct with his definition of the output gap but it does not really explain one of the mysteries of the fact that actual output can be greater than capacity as illustrated by a positive output gap in times of boom. I have heard the arguments to explain this such as overtime working , imports etc, but none of can effectively explain such a phenomenon. Additionally, I have also wondered how one calculates the capacity of an economy and the its expansion - unused office space, land, capital, unemployment, inventories? Any ideas or comments? Simon Foley ==================================== Simon Foley Head of Economics and Exams Officer - Bangkok Patana School E-mail: [log in to unmask] <mailto:[log in to unmask]> Phone 66 2 398 0200 Fax 66 2 399 3179 ==================================== ----- Original Message ----- From: "Alison Eves" < [log in to unmask] <mailto:[log in to unmask]> > To: < [log in to unmask] <mailto:[log in to unmask]> > Sent: Wednesday, October 31, 2001 2:37 PM Subject: Output Gap > I realise that this is probably a very simplistic question, but I have > got myself confused, and would appreciate some help. > I have found conflicting definitions of when an output gap is positive, > and when it is negative. Anderton (3rd Edition) page 167 says that the > output gap is positive when GDP is above the productive potential. Biz- > Ed glossary says that a positive output gap means we are producing less > than we potentially could. Most definitions just talk about "the > difference" between GDP and the productive potential, which avoids the > issue. Is there an accepted convention? > Thanks in anticipation > Alison > -- > Alison Eves