1) Determine the corresponding rate of cyclical unemployment in 2020 2) Determine the actual unemployment ??ut that would result in 2020 3) Use Okun’s law to determine the corresponding output gap in percentage terms for 2020.
Suppose the
??=???−0.25(??−?∗?)πt=πte−0.25(ut−ut∗)(supplied in picture)
The natural rate of
Scenario 1: the central bank performs a monetary contraction, and the inflation rate becomes 0.5%.
Scenario 2: the central bank performs a monetary expansion, and the inflation rate becomes 1.5%.
Scenario 3: the central bank keeps monetary policy unchanged, and the inflation rate matches expected inflation and equals 1%.
For each of these policy scenarios, 1) Determine the corresponding rate of cyclical unemployment in 2020 2) Determine the actual unemployment ??ut that would result in 2020 3) Use Okun’s law to determine the corresponding output gap in percentage terms for 2020.
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