<p>As denesp said, you're looking at a graph with no output gap.</p>

<p>A positive output gap usually does lead to employment being higher than the natural rate (=unemployment is lower than the natural rate).</p>

<p>Reading these lecture notes might help: <a href="http://eml.berkeley.edu/~jaya/lecture/Econ1_lecture9.pdf" rel="nofollow">http://eml.berkeley.edu/~jaya/lecture/Econ1_lecture9.pdf</a></p>

CC BY-SA 3.0
2015-09-16T13:43:27.363Z
2015-09-16T13:43:27.363Z
John L.
<p><strong>Okun's Law - the Basics</strong>:
In its most basic form, Okun's law investigates the statistical relationship between a country's unemployment rate and the growth rate of its economy. The economics research arm of the Federal Reserve Bank of St. Louis explains that Okun's law "is intended to tell us how much of a country's gross domestic product (GDP) may be lost when the unemployment rate is above its natural rate." It goes on to explain that "the logic behind Okun's law is simple. Output depends on the amount of labor used in the production process, so there is a positive relationship between output and employment. Total employment equals the labor force minus the unemployed, so there is a negative relationship between output and unemployment (conditional on the labor force)."</p>

<p>Read more: Okun's Law: Economic Growth And Unemployment <a href="http://www.investopedia.com/articles/economics/12/okuns-law.asp#ixzz3ol5l7KNz" rel="nofollow">http://www.investopedia.com/articles/economics/12/okuns-law.asp#ixzz3ol5l7KNz</a> </p>

CC BY-SA 3.0
2015-10-16T19:12:38.410Z
Hi, welcome to Economics SE. This answer doesn't quite address the question being asked (mostly because the question doesn't exactly make sense, as it is.)
Kitsune Cavalry
CC BY-SA 3.0
2015-10-16T18:56:10.160Z
2015-10-16T18:56:10.160Z
IRFAN ALI
<p>I have read that high output gaps (GDP gaps) are directly related to high unemployment rates. However, I did not find any source clarifying whether this "rule" apply to both positive and negative gaps or just to one of them. I can see how this relate to recessionary (negative) gaps, but I am not sure about the inflationary (positive) gaps. Some articles say that positive gaps cause unemployment rates to fall, but I just found a graph showing a rise in such rates also when positive gaps increase:</p>

<p><a href="https://i.sstatic.net/69bt8.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/69bt8.jpg" alt="source: http://www.niesr.ac.uk/blog/largest-and-longest-unemployment-gap-wwii#.VfjKOBFViko"></a></p>

<p><a href="http://www.niesr.ac.uk/blog/largest-and-longest-unemployment-gap-wwii#.VfjKOBFViko" rel="nofollow noreferrer">Image source</a></p>

CC BY-SA 3.0
2015-09-16T12:22:38.480Z
I am confused by your question. You talk about GDP gap but in the linked blogpost it is explained that the green line stands for unemployment gap, not GDP gap.
Giskard
<macroeconomics>
Does a high positive output gap relate to high unemployment rates?
Paulo Oliveira
# Does a high positive output gap relate to high unemployment rates?

(Asked by: username_0 on 2015-09-16)

I have read that high output gaps (GDP gaps) are directly related to high unemployment rates. However, I did not find any source clarifying whether this "rule" apply to both positive and negative gaps or just to one of them. I can see how this relate to recessionary (negative) gaps, but I am not sure about the inflationary (positive) gaps. Some articles say that positive gaps cause unemployment rates to fall, but I just found a graph showing a rise in such rates also when positive gaps increase:

[![source: http://www.niesr.ac.uk/blog/largest-and-longest-unemployment-gap-wwii#.VfjKOBFViko](https://i.sstatic.net/69bt8.jpg)](https://i.sstatic.net/69bt8.jpg)

[Image source](http://www.niesr.ac.uk/blog/largest-and-longest-unemployment-gap-wwii#.VfjKOBFViko)

**Tags:** macroeconomics

> **Comments:**
> **username_1**: I am confused by your question. You talk about GDP gap but in the linked blogpost it is explained that the green line stands for unemployment gap, not GDP gap.  

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## 2 answers

### Answer by username_2 on 2015-09-16. Score: 1

As denesp said, you're looking at a graph with no output gap.

A positive output gap usually does lead to employment being higher than the natural rate (=unemployment is lower than the natural rate).

Reading these lecture notes might help: <http://eml.berkeley.edu/~jaya/lecture/Econ1_lecture9.pdf>


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### Answer by username_3 on 2015-10-16. Score: 0

**Okun's Law - the Basics**:
In its most basic form, Okun's law investigates the statistical relationship between a country's unemployment rate and the growth rate of its economy. The economics research arm of the Federal Reserve Bank of St. Louis explains that Okun's law "is intended to tell us how much of a country's gross domestic product (GDP) may be lost when the unemployment rate is above its natural rate." It goes on to explain that "the logic behind Okun's law is simple. Output depends on the amount of labor used in the production process, so there is a positive relationship between output and employment. Total employment equals the labor force minus the unemployed, so there is a negative relationship between output and unemployment (conditional on the labor force)."

Read more: Okun's Law: Economic Growth And Unemployment <http://www.investopedia.com/articles/economics/12/okuns-law.asp#ixzz3ol5l7KNz>

> **Comments:**
> **username_4**: Hi, welcome to Economics SE. This answer doesn't quite address the question being asked (mostly because the question doesn't exactly make sense, as it is.)  

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