MEI 1e Consider the graph above that exhibits the Okun's Law. The graph has been constructed using the quarterly data on U. 5. real GDP, potential GDP. and cyclical unemployment rate from 1949 to 2019. The graph indicates a positive relationship between cyclical rate of unemployment and the percentage GDP gap. This is as predicted by Arthur Okun. However, notice two things. First. the relah'onship is not exact. The points do not lie very close to the line of best t. Second. the Okun's alpha for this period equals 1.40. However. the existence of a positive relationship is undeniable. The Okun's alpha in that graph {1.40) indicates that if the cyclical rate of unemployment is 3%, the GDP gap will equal percent. Also, if the cyclical rate of unemployment is -3%, the GDP gap will equal percent. 2 1e Consider the graph above that exhibits the Okun's Law. The graph has been constructed using the quarterly data on U. S. real GDP, potential GDP, and cyclical unemployment rate from 1949 to 2019. In the second quarter of 2019, the US. real GDP was 19,021.86 billion dollars (base year 22012}, the overall unemployment rate was 3.63%. and the natural unemployment rate was 457%. Using these numbers and the Okun's alpha of 1.40, we can estimate that in this quarter the potential GDP was units. The potential GDP in the second quarter of 2019 was actually billion dollars (base year =2012). So our Okun's formula undereshmated the true potential GDP by about percent. To nd the actual potential real GDP, follow the steps below. 0 Go to FRED website. Here is the URL: Federal Reserve Economic Data | FRED I St. Louis Fed (stlouisfedorgi F4 0 In the search box type GDPPOT. 0 Click on Real Potential Gross Dor'rlesbc Product El. 0 Click on EDIT GRAPH and make sure the data is quarterly. Click on X on the righthand corner. - Click on DOWNLOAD. - Find the potential GDP and use our rounding rules when entering the number in Canvas