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by Stephen K. McNees
January/Februrary 1991
Nearly thirty years ago, Arthur Okun posed the question,
"How
much output can the economy produce under conditions
of full employment?"
He offered a "simple and direct" answer that
now, with the
benefit of hindsight, seems outmoded and inadequate.
This article
argues that a minor modification of Okun’s procedure
based on demographics
can adequately account for changes in the potential
growth rate
over the last 35 years and provide an idea of what to
expect in the next
ten years.
Specifically, it is suggested that changes in the composition
and rate
of growth of the working-age population can account
for the low rate of
growth of potential GNP in the 1980s as well as suggest
that it will revert
to a more typical 2.5 to 2.75 percent by the late 1990s.
Full-text article 
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