Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the graph namedOkun's Lawthat has been constructed using the quarterly data on U.S. real GDP,potential GDP, and cyclical unemployment rate from 1949 to 2019.The

Consider the graph namedOkun's Lawthat has been constructed using the quarterly data on U.S. real GDP,potential GDP, and cyclical unemployment rate from 1949 to 2019.The graph indicates a positive relationship between cyclical unemployment and the percentage GDP gap. This is as predicted by Arthur Okun. However, notice two things. First, the relationship is not exact. The points do not lie very close to the line of best fit. Second, Okun's alpha for this period equals 1.40. However, the existence of a positive relationship is undeniable.

  1. The Okun's alpha in that graph indicates that if the cyclical rate of unemployment is3%, the GDP gap will equal _________percent. Also, if the cyclical rate of unemployment is-3%, the GDP gap will equal___________percent.
  2. In the second quarter of 2019, the U.S. real GDP was 19,021.86, the overall unemployment rate was 3.63%, and the natural unemployment rate was 4.57%. Using the Okun's alpha of 1.40, we can predict that in this quarter the potential GDP was __________units.

image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Andersons Business Law and the Legal Environment

Authors: David p. twomey, Marianne moody Jennings

21st Edition

1111400547, 324786662, 978-1111400545, 978-0324786668