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The Natural Rate of Unemployment

Milton Friedman and Edmund Phelps introduced the concept of the natural rate of unemployment reached in the long run as real factors dominate nominal influences.

The Phillips Curve

Critics of stabilization policy based on the Phillips curve argue that attempting to hold the unemployment rate below the natural rate will require accelerating inflation.

Okun's Law

1962.  "for every one percentage point by which the actual unemployment rate exceeds the "natural" rate of unemployment, there is a 2 to 4 % "GDP Gap". That is, unemployment above the inflation-threshold unemployment rate corresponds to real gross domestic product below potential output."  Okun's Law, Wikipedia.  [not well stated, make page?]

 

 

References

Nairu, Wikipedia.


 

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