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Utilize Okun's law to answer the questions below; ut - ut-1 = -0.4(gyt - 3%) Assuming ut-1 = 7%
a. Calculate the change in u (ut - ut-1) for each of the following values of gyt: 5%, 7%, 9%. How much has output growth increased? What happens to the change in unemployment due to this increase?
b. Calculate the change in u (ut - ut-1) for each of the following values of gyt: 2.5%, 1.5% and 0. How much has output growth decreased? What happens to the change in unemployment due to this increase?
c. Calculate the change in u (ut - ut-1) when gyt is 3%. What must the growth rate of output be to keep ut from changing?
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