Business, 24.03.2020 18:06, isophk

Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintained for one year reduces GDP by 2% of full-employment output. Note: Okun's Law can be expressed as:

(Y - Y`) / Y` = -2( u - u`)

Consider a two-year disinflation. In the first year, actual inflation, π is 8% and the expected inflation πᵉ is 12%. What is the first year unemployment rate?
By what percentage does output exceed full employment output?

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Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintain...