Question: 3. The output gap is the percentage difference between the actual level of real GDP and potential output. A positive output gap is associated with

3. The output gap is the percentage difference between the actual level of real GDP and potential output. A positive output gap is associated with lower-than-normal unemployment; a negative output gap is associated with higher-than-normal unemployment. The relationship between the output gap and cyclical unemployment is described by Okun’s law.

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