What is described by the term 'output gap'?

The term 'output gap' specifically refers to the difference between actual GDP and potential GDP. Actual GDP represents the economic output as it currently stands, while potential GDP reflects the maximum sustainable output level an economy can achieve when all resources are utilized efficiently, specifically under conditions of full employment.

When actual GDP falls below potential GDP, the economy is operating at a lower capacity, indicating underutilization of resources, such as labor and capital. Conversely, if actual GDP exceeds potential GDP, it can signal an economy operating overheated, often leading to inflationary pressures. Therefore, understanding the output gap is crucial for policymakers as it helps in assessing economic performance and devising appropriate monetary and fiscal policies to stabilize the economy.

The other options discuss different economic concepts unrelated to the definition of the output gap. For example, the total amount of goods produced at full employment refers to potential GDP itself, not the gap between this and actual GDP. The difference between imports and exports relates to the trade balance, and total government spending focuses on fiscal policy rather than output levels.