deflationary gap


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Related to deflationary gap: Inflationary gap

deflationary gap

n
(Economics) economics a situation in which total spending in an economy is insufficient to buy all the output that can be produced with full employment
References in periodicals archive ?
This sum constitutes the leakage or deflationary gap because this is the amount of money that comes into the banking system but cannot leave the system because there are no more borrowers left.
1 percent of GDP, effectively adding to the deflationary gap the equivalent of 2.
This 3 percent limit, however, was totally insufficient to fill the deflationary gap created by corporate debt repayment and increasing household savings.
From the macroeconomic perspective, the sum of household savings and net corporate debt repayment, which is the money that is entering the banking system but is not coming out to re-enter the income stream due to the lack of borrowers, constitutes the deflationary gap of the economy.
And it has been doing that literally from the first day the deflationary gap surfaced back in the early 1990s.
In the meantime, however, it also means accelerated debt repayment by these companies and enlarged deflationary gap for the economy as a whole.
With no one borrowing, the entire savings of the household sector together with the debt repayment of the corporate sector just sits in the banks unused, effectively becoming the economy's deflationary gap.
This means the entire savings of the household sector together with the debt repayment of the corporate sector have become the leakage to the income stream, effectively becoming the economy's deflationary gap.
Instead of losing half its GDP and 40 percent of its money supply as the United States did under President Hoover seventy years ago, Japan has managed to maintain stability for both because of the prompt fiscal response that filled the deflationary gap each year before the vicious cycle was allowed to start.
economy has sustained so far is probably less than the 8 percent GDP gap that Japan is facing now, any deflationary gap left unfilled can start a vicious cycle that can make life difficult for everybody.