Economy has natural rate of unemployment

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Okun's Law: Suppose the economy has a natural rate of unemployment of 6%.

a. Suppose short-run output over the next 4 years is +1%, 0%, -1%, and -2%, According to Okun's law, what unemployment rates would we expect to see in this economy?

b. Consider another economy in which the unemployment rate over the next 3 years is 6%, 7%, and then 4%. According to Okun's law, what are the levels of short-run output(Y~) in this economy?

Reference no: EM131244322

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