Describe GDP gap and Okun’s Law
Describe GDP gap and Okun’s Law?
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GDP gap is the difference between potential and actual GDP. Economist Okun quantified relationship between unemployment and GDP as follows: For every 1 percent of unemployment above the natural rate, a 2 percent GDP gap occurs. This has become known as “Okun’s law.”
Give a brief introduction of the term combined leverage? And in what manner it is calculated?
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