Table 2-13 (found on the textbook's Web site) gives data on real GDP (V) and civilian unemployment rate (X) for the United States for period 1960 to 2006.
a. Estimate Okun's law in the form of Eq. (2.22). Are the regression results similar to the ones shown in (2.22)? Does this suggest that Okun's law is universally valid?
b. Now regress percentage change in real GDP on change in the civilian unemployment rate and interpret your regression results.
c. If the unemployment rate remains unchanged, what is the expected (percent) rate of growth in real GDP? (Use the regression in [b]). How would you interpret this growth rate?