Macro problem (1 Viewer)

[hongco1990]

Hi
I've got some problems with the online quiz on vista, all related to output gap. Don't know whether Vista is wrong or because of me. Hope you'll help me out. Thanks
1. If real GDP is less than potential GDP, then:


a. the actual unemployment rate is greater than the natural unemployment rate
b. the actual unemployment rate equals zero
c. the output gap is negative
d. there is an expansionary gap

My answer is C but Vista's is A

2. According to Okun's law, when cyclical unemployment is negative, then the output gap: [

a. is +
b. -
c. equals zero
d.equals the rate of cyclical unemployment

My answer is A, Vista's is B

3. In Macroland, potential GDP equals $500 billion and real GDP equals $515 billion. Macroland has a(n) _________ gap equal to _____ % of potential GDP.
a. expansionary, -3
b. expansionary, 3
c. expansionary -15
d. recessionary 3

I chose B but the correct one is A.

 

[2162]

I think I remember my tutor saying that there is an error in the lecture notes where the lecturer used y*-y)/y* = -b(u*-u) instead of y-y*)/Y* = -b(u*-u).
I've done all the calculations and it seems like the person who made the test used the wrong formula. So I think your answers are correct.

 

[proringz]

Hi
I've got some problems with the online quiz on vista, all related to output gap. Don't know whether Vista is wrong or because of me. Hope you'll help me out. Thanks
1. If real GDP is less than potential GDP, then:


a. the actual unemployment rate is greater than the natural unemployment rate
b. the actual unemployment rate equals zero
c. the output gap is negative
d. there is an expansionary gap

My answer is C but Vista's is A

2. According to Okun's law, when cyclical unemployment is negative, then the output gap: [

a. is +
b. -
c. equals zero
d.equals the rate of cyclical unemployment

My answer is A, Vista's is B

3. In Macroland, potential GDP equals $500 billion and real GDP equals $515 billion. Macroland has a(n) _________ gap equal to _____ % of potential GDP.
a. expansionary, -3
b. expansionary, 3
c. expansionary -15
d. recessionary 3

I chose B but the correct one is A.

1. A pretty much implies C, from okun's law. Since actual unemployment > natural so the RHS of Okun's law is negative. Thus, LHS (output gap) is negative too.

2. Well, the formula gives beta as negative, but sometimes the law is written with beta postive. If we use the formula given in the book, the output gap should be positive, since the negatives cancel out but if we take beta as positive, then the output gap would be positive.

3. Since output = actual gdp - potential, Macroland would have an expansionary gap, which is positive. Thus 15bill/500bill = 0.03 = 3%. It would be negative it was a recessionary gap.