3. Suppose the economy has a natural rate of unemployment of 5%. (a) Suppose short-run output over the next two years are -1% and 2%. According to Okun's law, what unemployment rates would we expect to see in this economy? Consider another economy in (b) which the unemployment rate over the next two years are 7% and 8%. ACcording to Okun's law, what are the levels of short-run output Y_tilde in this economy?

3. Suppose the economy has a natural rate of unemployment of 5%. (a) Suppose short-run output over the next two years are -1% and 2%. According to Okun's law, what unemployment rates would we expect to see in this economy? Consider another economy in (b) which the unemployment rate over the next two years are 7% and 8%. ACcording to Okun's law, what are the levels of short-run output Y_tilde in this economy?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter21: Unemployment

Section: Chapter Questions

Problem 41CTQ: Unemployment rates have been higher in many European countries in recent decades than in the United...

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Unemployment rates have been higher in many European countries in recent decades than in the United States. Is the main reason for this long-term difference in unemployment rates more likely to be cyclical unemployment or the natural rate of unemployment? Explain briefly.
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