The estimates of Canada's output gap and the natural rate of unemployment vary substantially,but all estimates suggest that they have

Question

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The output gap and natural rate of unemployment are important macroeconomic indicators that have significant social costs when they deviate from their long-run equilibrium levels. A large output gap can lead to high unemployment rates, lower income levels, and increased social welfare costs, while a higher than natural rate of unemployment can lead to reduced economic growth, lower labor force participation, and decreased levels of consumer spending. Therefore, all estimates suggest that these variables have significant social costs.

The Estimates of Canada's Output Gap and the Natural Rate