Suppose the Okun's Law Coefficient Is 2,the Full-Employment Level of Output

question 59

Essay

Suppose the Okun's law coefficient is 2,the full-employment level of output is $5000 billion,and the natural rate of unemployment is 6%.
(a)What is the current level of output if the current unemployment rate is 8%?
(b)Suppose the unemployment rate falls to 5%; what is the current level of output?
(c)Suppose structural changes in the economy raise the natural rate of unemployment to 7%,and lower the full-employment level of output to $4800 billion.If the current unemployment rate is 8%,what is the current level of output?

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Definitions:

Entrepreneur

A person who organizes, operates, and assumes the risk for a business venture, often introducing new products, services, or business processes.

Short-Term Loans

Financial borrowing intended to be repaid within a short period, usually less than a year.

Discounted Present Value

A method of valuing a future amount of money by applying a discount rate to adjust for time and risk.