You are given the following data on the unemployment rate and output. Calculate the growth rate of
Question:
You are given the following data on the unemployment rate and output.
Calculate the growth rate of full-employment output in years 2, 3, and 4 two different ways. First, calculate the growth rates by using the values for full-employment output that you found in part (a). Then calculate the growth rate of full employment output by using only the change in the unemployment rate, the growth rate of output, and the growth rate version of Okun’s law, ΔY>Y = ΔY>Y - 2Δu, which is similar to Eq. (3.6), except that in Eq. (3.6), ΔY>Y = 3 for the United States, where for this economy, ΔY>Y could differ from 3 . Compare your answers from the two sets of calculations.
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Macroeconomics
ISBN: 9780134167398
9th Edition
Authors: Andrew B. Abel, Ben Bernanke, Dean Croushore