Principles of Macroeconomics / Unit 5 MAC 0419 short lesson, about 20 seconds
Full Employment and Potential GDP
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The idea
At the natural rate the economy is at full employment and real GDP equals potential GDP. Above the natural rate output is below potential; below it, output is above potential.
In practice
Full employment therefore includes people who are unemployed.
Where people slip
Output above potential can only last a while, which is why the natural rate anchors the models in units eight and nine.
Your place on the trail
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