Canada and usa map for Finally, for convenience purposes, the Phillips Curve is again often re-written replacing the unemployment rate with the deviation of actual output from potential output. Recall that when the actual unemployment rate coincides with the natural rate of unemployment, the economy is said to be producing at potential. Any time the economy's output level deviates from the potential output level then we know that the unemployment rate will differ from the natural rate of unemployment in a predictable manner. This representation using the deviation of output from potential is given by: p = pe + g(y – y*) where y is real gross domestic product, y* is potential gross domestic product, and the coefficient g measures the responsiveness of inflation to departures of output from potential.
Note that if one takes natural logarithms of real output and real potential output, then their difference essentially reflects the percentage by which output deviates from its normal or equilibrium level.
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In this specification, the parameter g > 0 indicates the extent to which the inflation rate is associated with the deviation of gross domestic product from its potential (i.e. Canada and usa map 2016.