4 Question 11Let u be the unemployment rate at period t, u be the natural rate of unemployment, and Y be theoutput gap. If you know that u>u, using your knowledge about Okun's Law, what would be yourbest guess about Y₁?OY>0OY=0Y<0Question 12Suppose that the inflation rate increases (+1> Tt) and the interest rate target does not change. Ifthe Central Bank changes the real interest rate in response to inflation shocks according a the MPcurve, how will the real interest rate move?O decreaseO increaseO stay the same

Q11 The Okun's Law says that for every 1% rise in unemployment GDP declines by 2%. We can use the…

Let u be the unemployment rate at period t, u be the natural rate of unemployment, and Y be the output gap. If you know that u>u, using your knowledge about Okun's Law, what would be your best guess about Y₁?

Let u be the unemployment rate at period t, u be the natural rate of unemployment, and Y be the output gap. If you know that u>u, using your knowledge about Okun's Law, what would be your best guess about Y₁?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 7E

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