2 Testing Okun's Law Okun's law is a statement in macroeconomics about how changes in the unemployment rate can predict changes in the GDP growth rate of a country. Broadly speaking, it states that a 1% increase in the unemployment rate is associated with a 2% fall in the GDP growth rate. In this question, we will use unemployoment rate and GDP growth rate data from the St. Louis Federal Reserve Economic Data (FRED) database to test this prediction. Our data will be found in the file okun.csv , but you can explore the full database at: https://fred.stlouisfed.org/ In the data file that we focus on, there are 3 columns for the year, the rate of GDP growth, and the unemployment rate during that year. (i) Using the unemployment rates, compute the annual changes in the unemployment rate Δ u t = u t - u t - 1 . Present a visual summary of the data (both unemployment and GDP). How do changes in unemployment relate to changes in GDP growth rates? 

Describe any outliers that you might observe in the data.  

Answer rating: 100% (QA)

To Recipient Name Subject Analysis of Okuns Law Using Unemployment and GDP Data Dear Recipient Name I am writing to share my findings on testing Okuns ... View the full answer