Questions
BU.220.610.51.FA25 M7 Practice Quiz
Single choice
The statistical relationship between changes in real GDP and changes in the unemployment rate is called:
Options
A.the Phillips curve.
B.the Solow residual.
C.the Fisher effect.
D.Okun’s law.
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Step-by-Step Analysis
When approaching the link between real GDP changes and unemployment changes, we need to recall which macroeconomic relationship directly connects these two variables.
Option 1: the Phillips curve. This concept traditionally links inflation ......Login to view full explanationLog in for full answers
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Similar Questions
The graph above shows the AD, LRAS, and SRAS functions for a country. The Fed is following an inflation targeting policy. Its target inflation rate is Π* = 5.00 percent and the potential GDP equals YP = 100,000. The Fed is quite successful in achieving its inflation target in the long run. Okun's alpha equals 2. Currently the economy is in the state of long-run equilibrium. The Fed decides to reduce the inflation target to 1 percent. This policy will cause the inflation rate in the short run to decrease to X percent and the cyclical unemployment in the short run to increase to Y percent. What are the values of X and Y?
The graph above shows the AD, LRAS, and SRAS functions for a country. The Fed is following an inflation targeting policy. Its target inflation rate is Π* = 5.00 percent and the potential GDP equals YP = 100,000. Their Fed is quite successful in achieving its inflation target in the long run. Okun's alpha equals 2. Currently the economy is in the state of long-run equilibrium. Consider a temporary supply shock. Suppose that oil producing countries suddenly increase the price of oil (as in 1973). As a result, the short-run aggregate supply function shifts up by 4.00 percentage points (for example, 5% becomes 9%). In the short run, if the Fed tries to keep the inflation rate equal to the target, cyclical unemployment will equal X percent. What are the values of X?
Defining 𝑢 as the unemployment rate and 𝑢 ¯ as the natural rate of unemployment, we can write Okun’s law for the United States as the following equation:
Using Okun's law, if the natural rate of unemployment is 4% and the actual unemployment rate is 9%, the output gap is:[Fill in the blank]
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