MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Question
Chapter 9, Problem 3P
To determine
The GDP gap and the output forgone.
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Assume that in a particular year the natural rate of unemployment is 5 percent and the actual rate of unemployment is 9 percent. Use Okun’s law to determine the size of the GDP gap in percentage-point terms. If the potential GDP is $500 billion in that year, how much output is being forgone because of cyclical unemployment?
Assume that in a particular year the natural rate of unemployment is 5 percent and the actual rate of unemployment is 9 percent. Use Okun’s law to determine the size of the GDP gap in percentage-point terms. If the nominal GDP is $500 billion in that year, how much output is being foregone because of cyclical unemployment?
According to Okun's Law, when cyclical unemployment increases from 2 to 4 percent, the recessionary gap increases from ___ percent.
a) -4 to -8
b) -2 to -4
c) 0 to 2
d) 4 to 8
Chapter 9 Solutions
MACROECONOMICS (LL)
Ch. 9 - Prob. 1DQCh. 9 - Prob. 2DQCh. 9 - Prob. 3DQCh. 9 - Prob. 4DQCh. 9 - Prob. 5DQCh. 9 - Prob. 6DQCh. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Prob. 10DQ
Ch. 9 - Prob. 11DQCh. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Prob. 3RQCh. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQCh. 9 - Prob. 11RQCh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8P
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- The version of Okun's law discussed in class implies that with no change in unemployment, real GDP growth is 3 percent. If the unemployment rate rose by 2 percentage points, Okun's law predicts that real GDP would: a. decreased by 4 percent b. decrease by 2 percent c. increase by 1 percent d. decrease by 1 percentarrow_forwardWhat is the relationship between potential output and the natural rate of unemployment? a. If the economy currently has a frictional unemployment rate of 2 percent, structural unemployment of 2 percent, seasonal unemployment of 2 percent what is the natural rate of unemployment? Where is the economy operating relative to its potential GDP? b. What happens to the natural rate of unemployment and potential GDP if cyclical unemployment rises to 3 percent with other types of unemployment unchanged from part a? c. What happens to the natural rate of unemployment and potential GDP if structural unemployment falls to 1.5 percent with other types of unemployment unchanged from part a?arrow_forwardSuppose the adult population rises by 4 percent and the labor force participation rate falls by 2 percent. If the number of unemployed decreases by 1 percent, what is the approximate percent change in the unemployment rate? Please don't answer in handwritten ..thankuarrow_forward
- What two types of federal government policy can mitigate cyclical unemployment? changes in consumption and investment expenditures changes in net factor payments and net exports changes in the money supply and interest rates changes in government expenditures and taxesarrow_forwardSuppose that the natural rate of unemployment in a particular year is 5 percent and the actual rate of unemployment is 9 percent . a ) Use Okun's law to determine the size of the GDP gap in percentage - point terms . b ) If the potential GDP is $ 500 billion in that year , how much output is being forgone because of cyclical unemploymentarrow_forwardAt break-even income level, households’ saving is zero. 1) True 2) False Cyclical unemployment is zero if there is no inflation. 1) True 2) Falsearrow_forward
- In which year did the economy above most likely have an actual unemployment rate equal to the sum of its frictional and structural unemployment rate?arrow_forwardIn 2009, Papua New Guinea had an estimated natural rate of unemployment equal to 4.7% and an actual unemployment rate equal to 4.3%. What was the size of cyclical unemployment?arrow_forwardHelp me with the following questions. Q) Suppose that in 2013 , potential GDP in the nation of Octavia is $ 85,000, real GDP is $75,000 and the potential GDP grows at the rate of 2% per year ... a) if real GDP is $78,000 in 2014 , using Okun's law .Calculate the cyclical rate of unemployment. b) If real GDP is $ 83,000 in 2015, using Okuns law, calculate the cyclical rate of unemployment.arrow_forward
- Suppose the economy has a population of 35 million people and a labor force participation rate of 50%. Furthermore, suppose the natural rate of unemployment in the economy is 6%. If the current number of unemployed people is 4 million people, what is the rate of cyclical unemployment rate? Answer: __________% (Cut off at the first decimal point.)arrow_forwardWhat type of unemployment (cyclical,frictional,or structural) applies to each of the following: a. landscapers laid off in response to drop in new housing construction during a recession. b. coal miners laid off due to EPA regulations that shut down coal fired power c. a financial analyst who quits his/her job in Chicago and is pursing similar work in Arizona d. printers laid off due to drop in demand for printed catalogues and flyers as firms go the internet to promote an advertise their products. e. factory workers in the U.S. laid off as the plants shut down and move to Mexico and Ireland.arrow_forwardWhich of the following policies would most likely reduce frictional unemployment? A. All of the stated policies are typically targeted to reduce frictional unemployment B. None of the of the stated policies are typically targeted to reduce frictional unemployment because frictional unemployment is the equivalent of “technological unemployment” articulated by Keynes in the General Theory C. Expansionary fiscal policy D. Reducing unemployment compensation payments E. Greater online or internet/web-based employment search sitesarrow_forward
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