Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 31, Problem 4SPPA
To determine
To explain:
The concept of Okun's law, and the way economy would behave in accordance to Okun's law if the natural
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Consider an economy that initially has a labor force of 2,000 workers. Of these workers, 1,900 are employed. The economy enters a recession. The
number of employed workers falls by 4%. In addition, 0.2% of the labor force becomes discouraged at the prospect of finding a job and leaves the labor
force. Show your calculation for the following.
a. How many workers are unemployed before the recession? What is the unemployment rate before the recession?
b. After the recession begins, what is the size of the labor force? How many workers are employed? How many workers are unemployed? What is the
unemployment rate?
c. Suppose that total output falls by 8% in the recession, what is the value of the Okun's law coefficient relating the loss of output to the increase in
unemployment?
The figure below depicts the economy of Altrua, which is presently in equilibrium. Enter your responses below rounded to one decimal
place.
Price level
340 360 380 400 420 440 460 480 500 520
Real GDP
AS
AD
60
LAS
a. The size of its recessionary gap is $
b. The size of this gap as a percentage of its actual GDP is
c. If the natural rate of unemployment is 3%, use Okun's law to calculate the amount of actual unemployment in Altrua
The actual rate of unemployment is
15 %.
Chapter 31 Solutions
Foundations of Economics (8th Edition)
Ch. 31 - Prob. 1SPPACh. 31 - Prob. 2SPPACh. 31 - Prob. 3SPPACh. 31 - Prob. 4SPPACh. 31 - Prob. 5SPPACh. 31 - Prob. 6SPPACh. 31 - Prob. 7SPPACh. 31 - Prob. 8SPPACh. 31 - Prob. 9SPPACh. 31 - Prob. 10SPPA
Ch. 31 - Prob. 11SPPACh. 31 - Prob. 1IAPACh. 31 - Prob. 2IAPACh. 31 - Prob. 3IAPACh. 31 - Prob. 4IAPACh. 31 - Prob. 5IAPACh. 31 - Prob. 6IAPACh. 31 - Prob. 7IAPACh. 31 - Prob. 8IAPACh. 31 - Prob. 9IAPACh. 31 - Prob. 10IAPACh. 31 - Prob. 1MCQCh. 31 - Prob. 2MCQCh. 31 - Prob. 3MCQCh. 31 - Prob. 4MCQCh. 31 - Prob. 5MCQCh. 31 - Prob. 6MCQ
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