Shortage in GDP
Definition
A situation where the gross domestic product (GDP) falls short of its potential level due to insufficient aggregate demand. It indicates an underutilization of resources within an economy.
Analogy
Think of a car engine running below its maximum capacity because it is not receiving enough fuel. Similarly, when there is a shortage in GDP, it means that the economy is not operating at its full potential due to inadequate demand.
Related terms
Recessionary gap: The difference between actual GDP and potential GDP when actual GDP is less than potential GDP.
Unemployment rate: The percentage of people who are actively seeking employment but cannot find jobs.
Expansionary monetary policy: Measures taken by central banks to stimulate economic growth by increasing money supply and lowering interest rates.
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