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Unformatted text preview: Actual output is 190 billion $ *Economic operators at under production level Okun’s Law Unemployment above the natural rate (or the cyclical unemployment) is 1%, the underproduction or loss in the economy or the GDP gap is 2% of the potential output. Example: Actual unemployment is 8% Natural rate is 6% Potential output is $200 billion GDP gap? Unemployment above natural rate: 8%-6%=2% The loss on potential GDP: 2%x2%=4% Then the loss in monetary terms is $200x4%=$8 billion...
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- Spring '11