Consider y be percent increase in annual US national production during the year when unemployment rate changes by u percent. (For instance, u = 2 if unemployment increases from 4% to 6%.) Okun's law expresses that
y=3.5-2u
(a) Determine meaning of number 3.5 in Okun's law?
(b) Compute the effect on national production of a year when unemployment increases from 5% to 8%?
(c) What change in unemployment rate corresponds to the year when production is same as year before?
(d) Determine meaning of the coefficient -2 in Okun's law?