--%>

GDP gap

"The economic cost of unemployment is measured by the GDP gap." Explain this statement. ?

E

Expert

Verified

The GDP gap refers to the gap between current GDP and the GDP that corresponds to full employment level. The latter is also called the ‘potential GDP’. When there is unemployment the economy is unable to produce at potential level and the shortfall is the cost that the economy pays in economic terms. This is the cost in economic terms as it is the ’economy’s’ loss. There are other costs of unemployment, but they are personal and restricted to the unemployed person and his family.

   Related Questions in Macroeconomics

  • Q : Change in real income when price fall I

    I have a problem in economics on Change in real income when price fall. Please help me in the following question. When gas prices drop from $2.65 to $2.45, the biggest change in real income is realized by: (1) Harry Hustler who drives his 1995 Lincoln 200,000 miles/ye

  • Q : Economic Economic systems differ

    Economic systems differ according to which two main characteristics?

  • Q : Physical quality of life index DISCUSS

    DISCUSS the experience of high GNP countries and low GNP with regard to PQLI.

  • Q : Explain Product Market Equilibrium. To

    To begin with, let us recall our three-sector product-market equilibrium model given as C + I + G = C + S + TTo this three-sector model, we now add the foreign trade-the exports (X) and imports

  • Q : Tariffs Tariffs: -are also called

    Tariffs: -are also called import quotas. -may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). -are per unit subsidies designed to promote exports. -are excise taxes on goods exported abroad.

  • Q : Explain growth accounting. Economic

    Economic growth is measured by the rate of increase in national output, GDP. The output depends on inputs -labour, capital technology etc. the theories of economic growth bring out how and to what extent each input or factor contributes to the g

  • Q : Change in stock Why change in stock is

    Why change in stock is considered a portion of final expenditure? Answer: The Unsold stocks left with producers are supposed as purchased by the producers themselve

  • Q : Fiscal deficit in government budget

    What does fiscal deficit in government budget mean? Answer: This means more borrowing on the portion of government.

  • Q : Fiscal deficits What are the causes of

    What are the causes of the fiscal deficits experienced by many developed nations in the past three years and what are the main effects of the resulting government borrowing? For example – Greece/Ireland/Portugal/Spain situation and the large def

  • Q : If the MPC is .70 and investment

    If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will: