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Specific gravity is a measure of the density of a liquid. Distilled water has a specific gravity of 1.000 at 15C and is used as a baseline. The specific gravity of beer measured before fermentation is called its Original Gravity (OG). This gives an idea of how much sugar is dissolved in the wort (unfermented beer) on which the yeast can work. The range of values goes from approximately 1.020 to 1.160 meaning the wort can be from 1.02 to 1.16 times as dense as water. When measured after fermentation it is called the Final Gravity (FG).
The difference between these two values is a good gauge of the amount of alcohol produced during fermentation. The OG will always be higher than the FG for two reasons. First, the yeast will have processed much of the sugar that was present, thus, reducing the gravity. And, second, the alcohol produced by fermentation is less dense than water, further reducing the gravity. The OG has a significant effect on the taste of the final product and not just from an alcoholic standpoint. A high OG usually results in beer with more body and sweetness than a lower OG. This is because some of the sugars measured in the OG are not fermentable by the yeast and will remain after fermentation.