Okun’slawfor Canadaisgivenby

ut-ut-1=0.33(gyt-3.7%)

Required:
a.Whatgrowth...

Question

Okun’slawfor Canadaisgivenby

ut-ut-1=0.33(gyt-3.7%)

Required:
a.Whatgrowth rateofoutputleadstoanincreaseintheunemployment rateof1 percent peryear?Howcantheunemployment rateincreaseeven thoughthegrowthrateof
output ispositive?

b.What rateof growthofoutput doweneedtodecrease the unemployment by1percentagepointover thenext fouryears?

c.Suppose thatweexperienceasecondbabyboom. HowdoyouexpectOkun’s lawto changeiftherateof growthofthelabourforceincreasesby2percentagepoints?

Robert · Accepted Answer

Okun’s law for Canada is given by 
ut-ut-1 = 0.33(gyt-3.7%) 
Required: 
a. What growth rate of output leads to an increase in the unemployment rate of 1 
percent per year? How can the unemployment rate increase even though the growth 
rate of 
output is positive? 
b. What rate of growth of output do we need to decrease the unemployment by 1 
percentage point over the next four years? 
c. Suppose that we experience a second baby boom.

Okun’slawfor Canadaisgivenby ut-ut-1=0.33(gyt-3.7%) Required: a.Whatgrowth rateofoutputleadstoanincreaseintheunemployment rateof1 percent peryear?Howcantheunemployment rateincreaseeven...

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