The economy is about to hit its full capacity. The central bank may even consider providing stimulus to the economy, for example by cutting interest rates or using non-standard measures, to prevent inflation from falling too low for too long or even deflation kicking in.Īfter a while, however, as employment picks up and companies produce more, slack starts to disappear. As a result, there is no danger of inflation getting out of control, so for the central bank it might mean that it can keep interest rates unchanged. This in turn means that they do not need to raise the prices of their products to cover higher wage costs. Even if the economy starts growing, there is still little pressure on producers at that stage to raise wages.

If there is a large amount of slack in the economy it tends to mean many people are looking for a job. This is why economists want to keep track of it as it can give important signals about what is happening in the economy. The reason that slack exists is usually due to insufficient demand relative to what the economy is capable of producing. Machines left idle in a factory or people who cannot find a job represent slack to an economist. Economic slack is a phrase used to describe the amount of resources in the economy that are not used.

Slack academic pricing