Question Description
I'm working on a macro economics multi-part question and need guidance to help me learn.
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1
Unemployment and Federal Interest rates
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Course Name and Number
Instructor's Name
Date
2
2.
In 2017, potential GDP was $18.7 trillion and real GDP was $18.08 trillion. In 2018,
potential GDP $18.51 trillion and real GDP was $18.56 trillion. Calculate the output gap for
each year. How did the output gap change between 2017 and 2018? Did it become more
positive or more negative?
𝑂𝑢𝑡𝑝𝑢𝑡 𝐺𝐷𝑃 =
𝐴𝑐𝑡𝑢𝑎𝑙 𝐺𝐷𝑃 – 𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 𝐺𝐷𝑃
∗ 100%
𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙
2017;(18.05 − 18.17)/18.17 ∗ 100% = −0.6604%
2018; 18.56 − 18.51)/18.51 ∗ 100% = 0.2701%
Output gap was more in 2018 from 2017, positive
6. What indicators should you use to track each of the following, and why?
a. The overall size of the economy – Real GDP
b. Labor market performance – Unemployment rate
c. The future trajectory of economic activity – Unemployment cost index
d. Wages and benefits – Consumer confidence
2. Use the accompanying table to answer the following questions.
Year
2014
2015
2016
2017
2018
Real GDP (trillions of $)
$17.11
$17.46
$17.78
$18.22
$18.77
Potential Output (trillions of $)
$17.38
$17.69
$17.99
$18.29
$18.65
a. Calculate the output gap for each year.
𝑂𝑢𝑡𝑝𝑢𝑡 𝐺𝐷𝑃 =
2014; (17.11 − 17.38)/17.38
2015; (17.46 − 17.69)/17.69
2016: (17....