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:

Long-run Average Cost

The cost per unit of output when all factors of production, including capital, are variable and optimized for scale.

Licensed Vendors

Businesses or individuals who have been granted official permission to sell goods or services, often within a particular jurisdiction or for a specific product.

Economic Practice

A system or set of methods followed in the management and administration of economic affairs.

Price Difference

The disparity in the cost between two related goods, markets, or time periods.