A.  Concepts of the output gap and its performance  The output gap is a term that refers to the difference between aggregate demand and supply capacity. Usually, actual GDP is used as a proxy for aggregate demand, and potential GDP as a proxy for supply capacity.
The Bank estimates potential GDP as the production level achieved under the current economic structure with an average utilization level of labor and capital stock. Generally, whether a country’s economic condition is in an upturn or a downturn can be judged on the basis of the level of aggregate demand relative to the level of supply capacity.