ECON 102 Lecture Notes - Lecture 25: Percentage Point, Total Factor Productivity
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ECON 102 Full Course Notes
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Lecture 25: measuring technology shocks and okun"s law. The effects of monetary shocks and technology shocks: okun"s law, measuring technology shocks. Okun"s law: when ue goes up by 1 percentage point, output goes down by 2, when ue goes down by 1 percentage point, output goes up by 2%. A simple, but wrong, model of okun"s law. Fixed number of people n are in the labor force (working or looking for work). Everyone who works works the same hours h: % y=% a+(1/3) % k + 2/3 % l. If ue falls from 5. 5% to 4. 5%, l goes from . 945 hn to . 955 hn, which is an increase of about 1. 05%: with no change in a or k, % y= 2/3 (1. 05%) = . 7: but the real-world number is % y 2%. Why a 1 percentage point reduction in the unemployment rate. = % y % k (1- ) % l. = % y (1/3) % k (2/3) % l.
