lecture16 - Agenda The Problem of Unemployment Unemployment...

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1 16-1 Unemployment and Inflation, Part 2 16-2 Agenda The Problem of Unemployment. The Problem of Inflation. 16-3 The Problem of Unemployment The costs of unemployment: ¾ Loss in output from idle resources: If full-employment output is $15 trillion, each percentage point of unemployment sustained for one year costs $300 billion according to Okun’s Law Each percentage point of cyclical unemployment is associated with a loss equal to 2% of full-employment output. 16-4 The Problem of Unemployment The costs of unemployment: ¾ Loss in output from idle resources: Workers lose income. Business firms lose profits. Government loses tax revenues. And increases spending for unemployment benefits and other transfer payments.
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