CH8-17.03.09 - Actual output is 190 billion $ *Economic...

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17.03.2009 CHAPTER 8 MACROECONOMIC INSTABILITY Economic Cost of Unemployment At full employment level (natural rate-cyclical unemployment is zero) ->Production (output) level of the economy? -Potential output level ->Potential output? -All resources uses. Example: NRU=6% Unemployment above the natural rate (cyclical) is 2% Total unemployment rate=8% ->Less than potential output (underproduction-eksik üretim) - >GDP gap (GDP açığı) Potential output is 200 billion $ >GDP gap
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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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