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Suppose that Okun's Law is given by the following equation for the US economy: "-1: "11 = '0-5(9Y _ 2%) a) What would the sign of (at ut_1) be if an

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Screen Shot 2019-05-02 at 6.49.06 PM.png

Screen Shot 2019-05-02 at 6.49.06 PM.png

Suppose that Okun's Law is given by the following equation for the US economy:
“-1: — “1—1 = ‘0-5(9Y _ 2%)
a) What would the sign of (at — ut_1) be if an economy were in a recession? What would the
sign of (at — ut_1) be if an economy were in a recovery period?
b) Where does the 2% number come from?
c) Explain why the Okun's coefficient is -0.5 but not -1.
(1) Suppose that there is a sharp increase in number of immigrants in the United States. How would the Okun’s law change for the US economy? Explain.

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