Answered: Based on Okun's rule of thumb, if you…

Based on Okun's rule of thumb, if you forecast that the output gap will decline from -1% to -3%, the unemployment rate will: O rise by 0.5%. rise by 2%. O rise by 1%. fall by 1%.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Based on Okun's rule of thumb, if you forecast that the output gap will decline from -1% to -3%, the unemployment rate will: O rise by 0.5%. rise by 2%. O rise by 1%. fall by 1%.

Definition Definition State in which an individual is without work, despite actively seeking employment opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed. Unemployment is one of the key indicators of the conditions prevailing in an economy. It is therefore considered a barometer that points out the condition of an economy.

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Okun's Law equation, y = a + bx + e, reflects the relationship between a country's growth rate (y) and unemployment rate change (x). The regression uses quarterly seasonally-adjusted data covering a 10-year period to estimate the Okun's Law equation coefficients, a and b. The regression results suggest Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations ANOVA Regression Residual Total. 0.581650024 0.338317797 0.326502044 2626981009 df 100 SS 1 197 5956155 99 386.4576539 100 584.0532695 Coefficients Standard Error Intercept 0.301072098 0.345330555 UnRateChange -5.665498514 1:058781687 MS 197.5956155 6.901029535 t Stat 0.871837414 -5.350960053 F 28.63277349 P-value 0.387019708 1.68197E-06 Significance F 168197E-06
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