Financial Terms Output Gap

# Definition of Output Gap

## Output Gap

The difference between full employment output and current output.

# Related Terms:

## Full-Employment Output

The level of output produced by the economy when operating at the natural rate of unemployment.

## input-output coefficient

a number (prefaced as a multiplier
to an unknown variable) that indicates the rate at which each
decision variable uses up (or depletes) the scarce resource

## Input-output tables

Tables that indicate how much each industry requires of the production of each other
industry in order to produce each dollar of its own output.

GDP.

## Potential Output or Potential GDP

output produced when the economy is operating at its natural rate of unemployment.

## SIMEX (Singapore International Monetary Exchange)

A leading futures and options exchange in Singapore.

## Beta coefficient

A measurement of the extent to which the returns on a given stock move with stock market.

## coefficient of correlation

a measure of dispersion that indicates the degree of relative association existing between two variables

## Coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and
independent variables in a regression analysis; for instance, the percentage of variation in the return of an
asset explained by the market portfolio return.

## coefficient of determination

a measure of dispersion that
indicates the “goodness of fit” of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model

## coefficient of variation

a measure of risk used when the standard deviations for multiple projects are approximately
the same but the expected values are significantly different

## Correlation coefficient

A standardized statistical measure of the dependence of two random variables,
defined as the covariance divided by the standard deviations of two variables.

## Correlation Coefficient

A measure of the tendency of two variables to change values
together

## Correlation coefficient

A statistic in which the covariance is scaled to a
value between minus one (perfect negative correlation) and plus one (perfect
positive correlation).

## Cyclical Unemployment

Unemployment that increases when the economy enters a recession and decreases when the economy enters a boom.

## Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.

## Frictional Unemployment

Unemployment associated with people changing jobs or quitting to search for new jobs.

## Full cost

The cost of a product/service that includes an allocation of all the (production and

## Full-Cost Method

A method of accounting for petroleum exploration and development expenditures
that permits capitalization of all such expenditures, including those leading to productive
as well as nonproductive wells.

## full costing

see absorption costing

## Full coupon bond

A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.

## Full Credit Period

The period of trade credit given by a supplier to its customer.

## Full Employment

The level of employment corresponding to the natural rate of unemployment.

## Full faith-and-credit obligations

The security pledges for larger municipal bond issuers, such as states and
large cities which have diverse funding sources.

## Full-payout lease

See: financial lease.

## Full price

Also called dirty price, the price of a bond including accrued interest. Related: flat price.

## Full-service lease

Also called rental lease. Lease in which the lessor promises to maintain and insure the
equipment leased.

## Fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised.

## Fully modified pass-throughs

Agency pass-throughs that guarantee the timely payment of both interest and
principal. Related: modified pass-throughs
Functional currency As defined by FASB No. 52, an affiliate's functional currency is the currency of the
primary economic environment in which the affiliate generates and expends cash.

## Information Coefficient (IC)

The correlation between predicted and actual stock returns, sometimes used to
measure the value of a financial analyst. An IC of 1.0 indicates a perfect linear relationship between predicted
and actual returns, while an IC of 0.0 indicates no linear relationship.

## Input-output tables

Tables that indicate how much each industry requires of the production of each other
industry in order to produce each dollar of its own output.

## Institutionally Induced Unemployment

Unemployment due to institutional phenomena such as the degree of labor force unionization, the level of discrimination, and government policies such as unemployment insurance programs, minimum wages, or regulations on business.

## Natural Rate of Unemployment (NRU)

The level of unemployment characterizing the economy in long-run equilibrium, determined by the levels of frictional, structural, and institutionally induced unemployment. At this rate of unemployment, inflation should be constant, so it is sometimes called the nonaccelerating inflation rate of unemployment, or NAIRU.

## Self-Employment Contributions Act (SECA)

A federal Act requiring self-employed business owners to pay the same total tax rates for Social Security and
Medicare taxes that are split between employees and employers under the Federal Insurance Contributions Act.

## Structural Unemployment

Unemployment due to a mismatch between the skills or location of labor and the skills or location required by firms.

## Unemployment Insurance

A program in which workers and firms pay contributions and workers collect benefits if they become unemployed.

## Unemployment rate

The ratio of the number of people classified as unemployed to the total labor force.

## Unemployment rate

Fraction of the labor force that is not employed.

## Uniformed Services Employment and Reemployment Rights Act of 1994

A federal act that minimizes the impact on people serving in the Armed Forces
their employment opportunities.