<p>I'm not sure that I would trust Investopaedia for economics.  Take for example,  the following sentence from what you have quoted:</p>
<blockquote>
<p>However,  the effect of excessively high demand is that businesses and employees must work beyond their maximum efficiency level to meet the level of demand.</p>
</blockquote>
<p>There is no 'must'  about it. For example, workers may decide that this is the perfect opportunity to organise a strike.</p>

CC BY-SA 4.0
2020-07-07T07:34:45.473Z
2020-07-07T07:34:45.473Z
Mozibur Ullah
<p>From Investopedia, &quot;A positive output gap indicates a high demand for goods and services in an economy, which might be considered beneficial for an economy. However, the effect of excessively high demand is that businesses and employees must work beyond their maximum efficiency level to meet the level of demand.&quot;</p>
<p>And from Lumen: &quot;when the economy is above full employment, then the unemployment rate is less than the natural unemployment rate and real GDP is greater than potential. Operating above potential is only possible for a short while, since it is analogous to workers working overtime.&quot;</p>
<p>Why do these websites claim that a positive output gap is not necessarily good? The unemployment rate is less than the natural unemployment rate (full employment rate) if the cyclical unemployment is lower, which means the economy is in an expansion. This means that more people have jobs, not the same workers are working more hours like these sites say, right? I understand that expansions are temporary, and there isn't always going to more output than expected, but why is having real GDP &gt; potential GDP <strong>bad</strong>?</p>
<p>From what I know, potential GDP is the amount of output of an economy when everyone who should have a job has a job. During an expansion, people who normally couldn't get a job, has jobs because there are more jobs. This increases output. And so Real GDP &gt; Potential GDP. That's it. I don't know why there would be a higher demand for goods, I don't get why workers would need to work overtime.</p>
<p>Can someone please clarify? Thanks!</p>
<p>Links:</p>
<p><a href="https://www.investopedia.com/terms/o/outputgap.asp#:%7E:text=An%20output%20gap%20indicates%20the,be%20either%20positive%20or%20negative" rel="nofollow noreferrer">https://www.investopedia.com/terms/o/outputgap.asp#:~:text=An%20output%20gap%20indicates%20the,be%20either%20positive%20or%20negative</a></p>
<p><a href="https://courses.lumenlearning.com/wm-macroeconomics/chapter/natural-unemployment/#:%7E:text=The%20economy%20is%20considered%20to,equal%20to%20the%20natural%20rate.&amp;text=By%20contrast%2C%20when%20the%20economy,GDP%20is%20less%20than%20potential" rel="nofollow noreferrer">https://courses.lumenlearning.com/wm-macroeconomics/chapter/natural-unemployment/#:~:text=The%20economy%20is%20considered%20to,equal%20to%20the%20natural%20rate.&amp;text=By%20contrast%2C%20when%20the%20economy,GDP%20is%20less%20than%20potential</a></p>

<gdp>
Why does a positive output gap imply workers working overtime?
chung
# Why does a positive output gap imply workers working overtime?

(Asked by: username_0 on 2020-07-02)

From Investopedia, "A positive output gap indicates a high demand for goods and services in an economy, which might be considered beneficial for an economy. However, the effect of excessively high demand is that businesses and employees must work beyond their maximum efficiency level to meet the level of demand."

And from Lumen: "when the economy is above full employment, then the unemployment rate is less than the natural unemployment rate and real GDP is greater than potential. Operating above potential is only possible for a short while, since it is analogous to workers working overtime."

Why do these websites claim that a positive output gap is not necessarily good? The unemployment rate is less than the natural unemployment rate (full employment rate) if the cyclical unemployment is lower, which means the economy is in an expansion. This means that more people have jobs, not the same workers are working more hours like these sites say, right? I understand that expansions are temporary, and there isn't always going to more output than expected, but why is having real GDP > potential GDP **bad**?

From what I know, potential GDP is the amount of output of an economy when everyone who should have a job has a job. During an expansion, people who normally couldn't get a job, has jobs because there are more jobs. This increases output. And so Real GDP > Potential GDP. That's it. I don't know why there would be a higher demand for goods, I don't get why workers would need to work overtime.

Can someone please clarify? Thanks!

Links:

[https://www.investopedia.com/terms/o/outputgap.asp#:~:text=An%20output%20gap%20indicates%20the,be%20either%20positive%20or%20negative](https://www.investopedia.com/terms/o/outputgap.asp#:%7E:text=An%20output%20gap%20indicates%20the,be%20either%20positive%20or%20negative)

[https://courses.lumenlearning.com/wm-macroeconomics/chapter/natural-unemployment/#:~:text=The%20economy%20is%20considered%20to,equal%20to%20the%20natural%20rate.&text=By%20contrast%2C%20when%20the%20economy,GDP%20is%20less%20than%20potential](https://courses.lumenlearning.com/wm-macroeconomics/chapter/natural-unemployment/#:%7E:text=The%20economy%20is%20considered%20to,equal%20to%20the%20natural%20rate.&text=By%20contrast%2C%20when%20the%20economy,GDP%20is%20less%20than%20potential)

**Tags:** gdp


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## 1 answers

### Answer by username_1 on 2020-07-07. Score: 0

I'm not sure that I would trust Investopaedia for economics. Take for example, the following sentence from what you have quoted:

> However, the effect of excessively high demand is that businesses and employees must work beyond their maximum efficiency level to meet the level of demand.

There is no 'must' about it. For example, workers may decide that this is the perfect opportunity to organise a strike.


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