part A: increase, decrease part C: rises, falls 0.60,0.75,1.05,4.50 answer all p

Question

part A: increase, decrease

part C: rises, falls
0.60,0.75,1.05,4.50

answer all parts

Attempts Do No Harm: 6 2. Working with Okun's law Aa Aa Okun's law says that a higher unemployment rate is associated with GDP. in the growth rate of real The following table presents hypothetical employment data for the U.S. economy in four consecutive years. In the following table, use Okun's law to predict the percentage change in real GDP from the previous year. Unemployment Rate Percentage Change in Real GDP Year 1985 1986 1987 1988 7.00% 6.20% 5.50% Based on the predictions of Okun's law, GDP will rise by 4.5% when unemployment percentage points by QNA 3.162004-2016 Aplia. All rights reserved © 2013 Cengage Learning except as noted. All rights reserved Grade It Now Save & Continue

Explanation / Answer

a) decrease in growth rate of real GDP

A percentage increase in unemployment causes a 2 percent reduction in GDP

b)

As unemployment falls by 1 percent, GNP increases by 3 percent

1986

c) unemployment falls by 1.5 percent

GNP will increase by 3*1.5 = 4.5 percent

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