Okun's Law Revisited: Should We Worry about Low Unemployment?
The quotation above expresses a common, if not dominant, view of the genesis of inflationary pressure in an economy. The story goes something like this: High GDP growth eventually places excessive strain on a nation’s resources. This strain can become particularly acute in labor markets, where it is manifested as low unemployment. The labor market tightness associated with this low unemployment ultimately leads to higher prices.
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