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Okun's Law is known for the relationship between output gap and unemployment: the gap between potential output and its actual level increases by 2 percentage

Okun's Law is known for the relationship between output gap and unemployment: the gap between potential output and its actual level increases by 2 percentage points for each extra percentage point of unemployment. If the relationship between inflation and unemployment (known as Phillips curve) is given by = e - 2.5 (u - 0.05), where 0.05 is natural rate of unemployment, then by what percentage does output fall short of full-employment output when = 0.06 and e = 0.08? (Hint: calculate unemployment rate from the Phillips curve and get the output shortage from Okun's law.)

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