3.11 FRED Mini #4 Potential GDP and the Output Gap

Potential GDP and the Output Gap

Learning Objectives

You will:

• Distinguish between actual and potential output
• Calculate and interpret output gaps
• Connect growth concepts to macro stability

Instructions

1. Graph Real GDP (GDPC1) (
3. ) and Real Potential GDP (GDPPOT) (
5. ) on the same FRED chart
6. Graph GDPC1 and GDPPOT together (last 25 years).
7. Compute the output gap for two dates:
8. Gap %= 100 x (Real GDP Potential GDP)/(Potential GDP)
9. Interpret: Which date shows more overheating or slack?

Submission Requirements

• One combined graph
• Two calculations
• Short interpretation (200250 words)

Transcripts from instructional video attached.