Imagine a new technology emerged, allowing for increased productivity and drivin
ID: 1112358 • Letter: I
Question
Imagine a new technology emerged, allowing for increased productivity and driving U.S. real GDP growth from 2.52.5 percent one year to 33 percent in the next year. Given this information, the change in the unemployment rate when the growth rate is2.52.5 percent will be to by nothing percent. (Round your response to the nearest two decimals) The change in the unemployment rate when the growth rate increases is 33 percent will be to decrease increase by nothing percent. (Round your response to the nearest two decimals)
Explanation / Answer
According to Okun’s thumb rule, when unemployment rate goes up by 1%, GDP goes down by 2%, so here
The change in the unemployment rate when the growth rate is 2.5 percent will be to 1.25 percent
The change in the unemployment rate when the growth rate increases is 33 percent will be to decrease by 16.5 percent