The term 'output gap' is best associated with:

The term 'output gap' is defined as the difference between the actual output of an economy and its potential output. Potential output refers to the maximum level of economic activity that can be sustained over the long term without leading to inflation, given the current resources and technology. When the actual output is less than potential output, it indicates underutilization of resources, often seen during economic downturns. Conversely, when actual output exceeds potential output, it can signal an overheating economy, which might lead to inflationary pressures. The output gap is a crucial concept in macroeconomics as it helps policymakers assess the state of the economy and to design appropriate economic policies to encourage growth or mitigate inflation. Understanding this gap can guide decisions related to monetary and fiscal policy to stabilize the economy.