COSTS OF UNEMPLOYMENT

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There are both economic and noneconomic costs to unemployment. The main economic cost is lost income and output which is measured in terms of the GNP gap. Okun's law is used to determine the GNP gap by using the following formula: for every 1% that the actual unemployment rate exceeds the natural rate of unemployment, there will be a 2.5% GNP gap. Another economic cost of unemployment is that its harm is not distributed equally: blue-collar workers and minorities experience higher rates of unemployment than the rest of society during recessions.