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Assume that the relationship between changes in the unemployment rate and real GDP growth is described by Okun's Law as follows: where represents real GDP
Assume that the relationship between changes in the unemployment rate and real GDP growth is described by Okun's Law as follows:
where represents real GDP growth and shows the changes in the unemployment rate. If GDP decreases by 3% as a result of the reduction in C, I, and NX, what would be the impact on the unemployment rate in Australia? What is the degree of correlation?Explain your answers.
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