Assume that the unemployment rate is 7% and GDP is $4,000 billion. What is a rou

Question

Assume that the unemployment rate is 7% and GDP is $4,000 billion. What is a rough estimate of the potential GDP if the NAIRU is 5%?Assume that potential GDP is growing at 3% annually. What will potential GDP be in 2 years?How fast will actual GDP have to grow to reach potential GDP in 2 years?

Suppose, in April the number of employed stood at 137.7 million while the number of unemployed stood at 8.8 million. What was the unemployment rate in April?In June there are 30,000 people classified as unemployed and the size of the labor force is 600,000. The only change between June and July is that 10,000 people give up looking for work. Compute unemployment rate in July.

Explanation / Answer

The cyclic unemployment is 2% , so there is cope for GDP to rise 4% i.e. potential GDP is 4160.

4160 * 1.03 ^2 = 4413.3

4000*1.0x^2 = 4413.3
1.0x^2 = 1.1033
1.0x = 1.05
so it has to grow at 5%

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