AS.180.101 Lecture Notes - Lecture 2: Procyclical And Countercyclical, Great Moderation, Comparative Advantage
Document Summary
Lecture #9: okun"s law and labor force participation. Relating real gdp growth to changes in unemployment. We can grow as fast as the sum of the labor force + labor productivity. The okun coefficient: 2 reasons that it is bigger than 1 : 1. A fall for unemployment of 1% point delivers more than a 1% rise for employment, if labor force participation is rising: 2. A pop for productivity, above its trend rate, means output will grow faster than. When unemployment goes down, gdp goes up and vice versa. Annualize gdp and gdp actually rose only 2. 5%!!!!!!!!!!!! To produce a 2. 5% real gdp growth rate unemployment change should have been. 6. 2%!!!: thus, okun is way off the mark . Highly important: calculating gdp from q2 2009 to q2 2014 over 5 years take it to the 1/5 power when calculating gdp. Hawks: they say that productivity is unluckily to be 1. 3%.
