I need help with my Economics homework! Please...?

Question

According to Okun's law, if potential real gdp is $200 billion and if natural rate of unemployment is 6% and actual rate of unemployment is 12%, What is the size of the negative gdp as a percent of potential gdp?

Answer 1

Current regressed data for US:

ΔY/Y=0.03 - 2ΔU

ΔY=200*(0.03-2*(12%-6%))=

=200*(0.03-0.12)=-200*0.09= -18

ΔY%= -18/200= - 0.09 = -9%

http://web.csustan.edu/ppa/llg/statdata/...

http://economics.about.com/cs/termpaperh...

http://en.wikipedia.org/wiki/Okun's_law

http://upload.wikimedia.org/wikipedia/co...