How the economy has a natural rate of unemployment

Reference no: EM13181630

Suppose the economy has a natural rate of unemployment of 5%.

a. Suppose short-run output over the next four 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 three years is 6%, 7%, and then 4%. According to Okun's Law, what are the levels of short run output (Y tilde) in this economy?

Reference no: EM13181630

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