NAIRU and GDP


To repeat,

Remember that unemployment is the proportion of the labor force who are not employed. Thus, corresponding to the NAIRU is a rate of employment, a proportion of the labor force employed, that also corresponds to a stable rate of inflation. We can multiply that rate of employment by the labor force to get the number of employees corresponding to a stable rate of inflation. Finally, multiplying that number by the average productivity of labor, we get the real GDP that corresponds to a stable rate of inflation. We could call this real GDP the NAIRGDP -- the non-accelerating-inflation real gross domestic product. Restating the above list in terms of NAIRGDP, we see that


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