The figure on the right plots the change in the unemployment rate on the vertica

Question

The figure on the right plots the change in the unemployment rate on the vertical axis against the output growth rate on the horizontal axis for a hypothetical economy. The line drawn in the graph gives the best fit to the scatterplot. According to this figure, lower output growth leads to a decrease inthe unemployment rate If the slope of the line in the graph is -0.4, we can say that, on average ? a decrease in the growth rate of 1% increases the unemployment rate by roughly % (Enter your response as a positive real number.) According to the figure, the unemployment rate will remain constantif the output growth rate is about %. (Round your response to one decimal place.) -6 3 0 3 6 8 10 Output growth (percent)

Explanation / Answer

(a) INCREASE

A low rate of economic growth can cause higher unemployment.

If there is negative economic growth (recession) we would definitely expect unemployment to rise. This is because:

(b)

slope=(y2-y1) / (x2-x1)

-0.4 =(y2-y1) / (-1%)

So (y2-y1)=0.4% So answer is 0.4

(c) Unemployment Rate constant So change in Unemployment Rate is 0.

So that 0 line touches the plot when x is between 5 nd 6

(The figure is not horizontal So exact one decimal place cannot be judged)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---