Discuss the okuns law, The accompanying scatter diagram

Discuss the okuns law

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Reference no: EM131530714

Question: The accompanying scatter diagram shows the relationship between the unemployment rate and the output gap in the United States from 1996 to 2013. Draw a straight line through the scatter of dots in the figure. Assume that this line represents Okun's law:

Unemployment rate = b - (m × Output gap) where b is the vertical intercept and -m is the slope

What is the unemployment rate when aggregate output equals potential output? What would the unemployment rate be if the output gap were 2%? What if the output gap were -3%? What do these results tell us about the coefficient m in Okun's law?

Reference no: EM131530714

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