9. You are given the following data on the unemployment rate and output.

Year 1

2 Unemployment rate Output 8%

3 6%

950 1030 7%

1033.5 4

5%

1127.5

a. Assume that the natural rate of unemployment is 6% and that

(¯¯¯

Y −Y)/¯¯¯

Y =2(u−¯ u)

. Find the full-employment level of output in each year.

b. 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 ( ). Then calculate the a

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 =Δ¯¯¯

Y /¯¯¯

Y −2Δu

, which is similar to Eq. (3.6) , except that in Eq. (3.6) ,

 Δ¯¯¯

Y /¯¯¯

Y =3 States, where for this economy,

Δ¯¯¯

for the United Y /¯¯¯



could differ from Y

3. Compare your answers from the two sets of calculations.