Lucas Wedge


DEFINITION of 'Lucas Wedge'

The aggregate amount of loss in output for an economy that is the result of a slowdown in the growth rate of the real gross domestic product (GDP). The Lucas wedge is a visual representation of where a given economy would be in terms of economic output if there hadn't been a slowdown.


The Lucas wedge represents the costs to society because of the inefficiency in the market. This deadweight loss is a burden on society and often cannot be avoided because of economic conditions or government policy. Many economics will calculate the Lucas wedge by analyzing the difference between potential GDP and the actual figures.

  1. Soft Patch

    A period of economic slowdown amid a larger trend of economic ...
  2. Real Gross Domestic Product (GDP)

    An inflation-adjusted measure that reflects the value of all ...
  3. Deadweight Loss

    The costs to society created by market inefficiency. Mainly used ...
  4. Economic Growth

    An increase in the capacity of an economy to produce goods and ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  6. Labor Productivity

    A measurement of economic growth of a country. Labor productivity ...
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