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116-1Unemployment and Inflation,Part 216-2Agenda•The Problem of Unemployment.•The Problem of Inflation.16-3The Problem of Unemployment •The costs of unemployment:¾Loss 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.16-4The Problem of Unemployment •The costs of unemployment:¾Loss 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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