Why is there a large output gap in initial recovery stage?
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large output gap is due to economy just starting to recover i.e. GDP going from probably negative territory to positive territory but still far off from potential trend GDP growth. Hence, large output gap in this phase.
During the Initial recovery, the business cycle is at its trough and its the farthest point form the trend line, that difference is also known as Output Gap.
Because according to our trend rate lets see we should group by 7% but we are currently growing at 1%, so the output gap from the trend line is 6%. I hope that answers your question.