Question
Assume autonomous consumption is $180, autonomous investment $250, government purchases $280, net lump-sum taxes $50, exports $100, autonomous imports $50, marginal propensity to consume is
Assume autonomous consumption is $180, autonomous investment $250, government purchases $280, net lump-sum taxes $50, exports $100, autonomous imports $50, marginal propensity to consume is 0.8, income tax rate 20%, marginal propensity to invest 0.03 and marginal propensity to imports 0.07. In this economy the expected price level is 30, actual price level is 26, sensitivity of output to unexpected changes in prices is 50, and the Okun's coefficient is 2.5, the natural rate of unemployment is 5 %. Calculate
(i) the actual rate of unemployment;
(ii) the output gap (both in figures and in percent).
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