Okun's law and the theory of "full employment" of the population. Law A
Saint Petersburg
State University of Economics and Finance
Essay on macroeconomics on the topic:
"Oaken's Law"
Completed: Maxim Nikiforov (352 gr)
Scientific adviser: Amosova V.V.
St. Petersburg 2009
Introduction
Unemployment: essence
Okun's ratio calculation
Conclusion
List of used literature
Introduction
The negative relationship between the unemployment rate and the rate of economic growth is called Okun's law in honor of the American economistArthur Okun , who established an empirical relationship between these parameters in the early 1960s.
He expressed the established dependence by the formula:
Yf is the real value of the national income of full employment.
Y is the real value of the national income.
(Yf - Y) - "opportunistic gap"
Okun parameter
U is the actual unemployment rate.
U* is the natural rate of unemployment.
(U-U*) – the level of opportunistic unemployment.
The meaning of this formula expresses the so-called Okun's law: if the economic unemployment increases by 1 point, then the economic gap increases by points.
That is, the relationship between changes in the unemployment rate and the gap between the actual and potential volumes of GDP is described. Okun attributed this to the fact that when opportunistic unemployment appears:
Not all those laid off are registered as unemployed;
Some of those who remain at work are transferred to a shorter working day;
The average productivity of labor is declining due to the presence of hidden unemployment in production.
Let's take a closer look at unemployment.
Unemployment: essence
In real life, in a market economy, "full employment" is constantly accompanied by unemployment.
Unemployment is the proportion of the working population that has temporarily or permanently lost their job.
The demand for labor depends on the amount of capital expended on labor, or variable capital. The relative reduction of this capital entails a relative reduction in the demand for labor. The accumulation of capital leads to the drawing into production of an ever smaller additional labor force.
The growth of the technical structure, embracing new capitals, subsequently spreads to old, previously functioning capitals. Each capital must be renewed over time, since all elements of fixed capital eventually wear out. But when old capital is renewed, its technical composition usually does not remain unchanged, it rises. This leads to an absolute reduction in the demand for labor, to the displacement of part of the previously employed workers from production.
Suppose the old capital was $10 million, consisting of $5 million spent on material conditions of production and $5 million spent on labor power. Then the time came for the renewal of this capital, and it is renewed in a new composition: the ratio is no longer 1: 1, but 3: 1. In this case, out of 10 million dollars, 7.5 million dollars will fall on material conditions, and labor the force of only 2.5 million dollars. Consequently, the capital spent on labor, and at the same time the demand for labor, will be halved.
As a result of both of the above processes - the slower attraction of additional labor force due to the growth of the technical composition of newly invested capital and the expulsion of part of the previously employed workers from production as a result of the growth of the organic composition of the old capital - an army of unemployed is inevitably formed.
Education and the growth of unemployment are a specific law of population. The essence of the law of population is that hired labor, contributing to the growth of profits, creates a source for the accumulation of capital, while the latter, through the mechanism of growth in the technical composition of capital, generates an industrial army of the unemployed. In this regard, the unemployed represent a relative overpopulation. The labor force becomes redundant in relation to the demand for it. This does not mean that there is an absolute surplus of population.
The root cause of unemployment is the growth of the technical composition of capital.
Thus, the industrial reserve army is a product of the accumulation of capital in a market economy.
Unemployment is when part of the active population cannot find work, it becomes a "surplus" population - a reserve army of labor. Unemployment increases during economic crises and subsequent depressions as a result of a sharp reduction in the demand for labor.
Okun's ratio calculation
According to many calculations carried out over the intervals from 1948 (from that time quarterly GDP statistics for the United States appeared) to the present, GDP growth, at which there is no change in the unemployment rate, averages about 3% per annum. This value can be interpreted as the result of the growth of the economically active population, the capital-labor ratio and the total productivity of production factors (or, if you prefer, scientific and technological progress, which is not the same, but close). A 1 percentage point change in the unemployment rate corresponds to a 2 point deviation in real GDP growth from that level.
But this is the American version. To check the operation of the law in Russia, we will use statistical data:
1) First look at the left side of the formula. We need to calculate the size of the market gap. To do this, one should know the potential production volume Yf for this technique - the national income of full employment, and the actual national income Y. 1
(Y) actual |
(Yf) at full employment |
||||
Now we calculate the gap:
Now we can find out the values of the left side of the formula by dividing the business gap by the full-time national income: 2
The data is considered as a percentage for the convenience of further conversions.
natural rate of unemployment |
actual unemployment |
|
Now the unemployment rate is:
opportunistic unemployment |
||
All the necessary data for the calculation of the Okun coefficient have been obtained. It will be equal to the ratio of the economic gap divided by the national income of full employment to the economic unemployment.
Okun's ratio |
|
The average will be 1.43. This means that each percentage of short-term unemployment reduced the actual volume of GNP by 1.43% compared to the GNP of full employment.
During the previous recession of 1990-1998, which, judging by the dynamics of GDP, was much deeper than the current one, the problem of unemployment seemed to be less acute. What can statistics say about this? How much has employment flexibility increased in relation to output during the inter-crisis decade?
The GDP elasticity of the unemployment rate, calculated for the period from 1995 to 2008, is about 2. That is, with a 10% fall in GDP, the unemployment rate increased on average by about 20% (namely, percent, not percentage points!), then eat instead of, say, 7 became 8.4%. The reaction, as we see, as a whole is unusually weak. This is most likely due to the fact that the period 1995–1998 is critical for determining the average elasticity, when the most profound changes occurred in both GDP and employment. And this is still a completely different economy, with low-elastic employment. Many people preferred to stay at their previous jobs, getting a penny, in the hope of surviving difficult times, and the management of enterprises generally adhered to the same “Soviet” principles of employment.
Therefore, in 1999, employment grew very slowly, despite the rise in GDP: enterprises had large internal reserves not only of production capacity, but also of the intensity of the use of available workers.
In the future, the reaction of employment to changes in GDP dynamics, in particular, to the acceleration of growth in 2006–2007 and to the recession of 2008–2009, turns out to be much sharper than the “average interval” equation predicts. In the period 2005-2008, a similar elasticity is already about 5, which means that a 10% fall in GDP will cause an increase in the unemployment rate from 7 to about 10.5%. That is, the response according to Okun is approximately 1 to 3: for 1 percentage point increase in unemployment - 3% fall in GDP.
How much could unemployment rise given the current elasticity and some reasonable forecast of a decline in GDP? The Ministry of Economic Development in its forecast expects a decline in annual GDP in 2009 by 2.2%, assuming that the decline in production will go on for at least the first two quarters. With these assumptions and a V-shaped curve of production dynamics during this year, the fall in GDP at the bottom (that is, in the second quarter of this year) relative to the peak of the third quarter of last year will be about 6% (in seasonally adjusted volumes), and, based on elasticity of the unemployment rate to GDP at the level of 5, the latter at the lowest point of the decline will not exceed 8 percent. If, under the same assumptions, annual GDP falls by 5%, then the bottom of GDP will decrease by 11% to the peak, and the unemployment rate at the lowest point of the crisis will exceed 10%. Finally, with the same 5% annual decline in GDP, but with an L-shaped recession, the bottom to the peak is 7%, the unemployment rate, respectively, is lower, about 8.5%, but it remains so for at least three quarters until the end of this year. of the year.
However, the value of these arithmetic exercises is not very high. It is possible that in the interval where we estimated the GDP elasticity of unemployment, the same wait-and-see behavior of employers was observed in part, as during the 1998 crisis, and the real sensitivity of unemployment to a recession will eventually turn out to be much higher. 3
Conclusion
In general, I agree with the above. I think the law can work. But, for this, the economy must be developed, "calm" ... Something constantly happens in Russia. Often the reasons are not so much economic as political. In addition, in our country, many things are not according to the law. And the laws are far from in favor of entrepreneurs, small and medium-sized businesses. Therefore, even if there were really full employment or employment close to full (3-4%), there would still be a lot of restraining mechanisms to objectively reflect the increase in the labor force in GDP growth. Law Okena. Actual or observed level...
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Unemployment leads to significant economic losses in goods and services not created due to equipment downtime. As a result, a certain part of GDP is not produced (danger of cyclical unemployment).
The relationship between GDP losses and unemployment is determined by Arthur Okun's law (1928-1979): every 1% increase in unemployment above its natural rate leads to a lag in GDP by 2.5%.
where Y is actual GDP;
Y' - potential GDP;
U is the actual unemployment rate:
Un is the natural rate of unemployment;
λ is the sensitivity coefficient (in absolute terms) of GDP to changes in cyclical unemployment - the Okun coefficient.
Assume that frictional, structural, and cyclical unemployment are 3% each. What will be the loss of GDP with this level of unemployment in the country? The natural unemployment rate (frictional plus structural) is 6%, and the actual unemployment rate (natural plus cyclical) is 9%, i.e. 3% above the natural level. GDP losses will be 3% 2.5 (Oaken's number) - 7.5%.
The transition to a market economy is accompanied by an increase in unemployment. The problems of employment of the population, its career guidance and retraining, the issuance of unemployment benefits are dealt with by special employment services.
The state provides certain social guarantees to the unemployed. So, they are paid unemployment benefits, financial assistance is provided to the unemployed and his family members, a scholarship is paid during the period of professional retraining, expenses are reimbursed and compensation is issued in connection with moving to another locality to a new place of residence, to a place of work in the direction of the state employment service.
2.4 Socio-economic consequences of unemployment
Are the consequences of unemployment a serious problem? Undoubtedly. The socio-economic consequences of unemployment are considered, along with the problems of poverty and social instability, as one of the most acute global and national problems.
Indeed, during the transition period, the only way to induce large masses of people to move in order to more rationally shape the employment structure is to force them out of inefficient industries. At the same time, it is obvious that the implementation of super-tough measures can cause massive bankruptcy of enterprises and the emergence of such a wave of unemployment that will inevitably lead to a social explosion. A "reasonable measure" of rigidity must be observed.
Very often, only the economic effect of unemployment is assessed in the form of the number of laid-off workers and the amount of benefits paid, while the social consequences, which are difficult to distinguish and are cumulative, are practically not assessed. However, the degree of negative impact of unemployment on the situation in the country depends on the specific parameters of the social situation.
It should be noted that it is necessary to determine not only the possibility of assessing social damage or indirect losses in the economy (from a decrease in the amount of hours worked, a drop in labor intensity and productivity), but also direct costs associated with an increase in government spending to overcome socially negative processes. Such studies are of undoubted interest, since they make it possible to more clearly define the boundaries of the problem and outline ways out of the crisis, in accordance with the peculiarities of the country's social, economic and political development at the present stage.
I. Social Consequences of Unemployment
Negative
1. Aggravation of the crime situation.
2. Increased social tension.
3. Growth in the number of physical and mental illnesses.
4. Increasing social differentiation.
5. Decrease in labor activity.
Positive
1. Increasing the social value of the workplace.
2. Increase personal free time.
3. Increasing freedom to choose a place of work.
4. Increasing the social significance and value of labor.
II. Economic consequences of unemployment
Negative
1. Devaluation of the consequences of learning.
2. Reducing production.
3. The cost of helping the unemployed.
4. Loss of qualification.
5. Decline in living standards.
6. Underproduction of the national income.
7. Reduced tax revenue.
Positive
1. Creation of a reserve of labor force for the restructuring of the economy.
2. Competition between workers as an incentive to develop the ability to work.
3. Break in employment for retraining and education.
4. Stimulating the growth of labor intensity and productivity.
During the development of economic theory (in particular, the theory of unemployment, its types and causes), various economists have proposed their own options for reducing the unemployment rate. For example, Keynesians believed that a self-regulating economy could not overcome unemployment. The level of employment depends on the so-called "effective demand" (simplistically - the level of consumption and investment). J. M. Keynes wrote: "The chronic tendency towards underemployment, characteristic of modern society, has its roots in underconsumption ...". Underconsumption is expressed in the fact that as the consumer's income rises, due to psychological factors, the “propensity to save” exceeds the “urge to invest”, which leads to a decline in production and unemployment.
Thus, the Keynesians, having shown the inevitability of the crisis of a self-regulating economy, pointed to the need for state economic influence in order to achieve full employment. The first step is to increase effective demand by lowering interest rates and increasing investment. Monetarists opposed Keynesian methods.
In 1967, M. Friedman suggested the existence of a "natural level of unemployment", which is strictly determined by the conditions of the labor market and cannot be changed by government policy measures. If the government tries to keep employment above its "natural level" through traditional budgetary and credit methods of increasing demand, then these measures will have a short-term effect and will only lead to higher prices.
Monetarist methods of regulating employment are quite radical. They accuse workers of abstaining from work and being compensated in the form of benefits. Hence the recommendation to abolish these benefits in order to force people to work. Monetarists propose to stop stimulating economic growth by increasing demand. However, the policy of restricting demand can cause a sharp deterioration in the living standards of the population, which will affect the social situation. What steps can the state take to reduce the unemployment rate?
The variety of types of unemployment makes the task of reducing it extremely difficult. Since there is no single way to deal with unemployment, any country has to use different methods to solve this problem.
There are four main areas of state regulation of the labor market.
First, these are programs to stimulate employment growth and increase the number of jobs;
Secondly, programs aimed at training and retraining the workforce;
Thirdly, programs to promote the recruitment of labor;
Fourth, programs for social insurance of the unemployed.
In addition, there is indirect regulation of the labor market:
tax;
Monetary;
depreciation policy.
Measures of indirect regulation of the labor market are at the same time measures of general economic regulation and affect the dynamics of employment and unemployment.
Okun's law is applied in macroeconomics, it explains the relationship between the unemployment rate and the gap from the potential. The law is more theoretical in nature, explaining the general trend of the studied indicators.
Statement of Okun's Law
Okun's law is described by the following formula:
Y ∗ Y- Y ∗ ⋅ 1 0 0 % = − k (u − u ∗ )
where YY Y- the actual size of GDP, m.u.;
Y ∗ Y^* Y ∗ - potential size of GDP, de.u.;
−k-k − k- a coefficient that determines the relationship between the excess of the real unemployment rate over the natural one and the lag of real GDP from potential (Oaken coefficient);
U u u- unemployment rate, %;
U ∗ u^* u ∗ - natural rate of unemployment, %.
Examples of problem solving
Example 1In a certain country, unemployment was 7.5%, and its natural rate was 4%, while the Okun coefficient, obtained empirically by economists of this country, is 2.5. It is necessary to determine how much real GDP lags behind potential GDP.
Decision
We use the formula above. In this case, the left side of this formula will be the lag that needs to be found:
Y − Y ∗ Y ∗ ⋅ 100 % = − 2 .5 (7 . 5 − 4) = 8 . 75 % \frac(Y-Y^*)( Y^*)\cdot 100\%= -2.5 \left (7.5-4\right) = 8.75%Y ∗ Y- Y ∗ ⋅ 1 0 0 % = − 2 , 5 (7 , 5 − 4 ) = 8 , 7 5 %
Answer: 8 , 75 % 8,75\% 8 , 7 5 % .
Example 2In a hypothetical country, the GDP is CU8,000 million, while the potential country is CU10,000 million. During the same period, unemployment reached a value of 6%, and its natural rate of 4%. Determine Okun's coefficient.
Decision
From the formula
Y − Y ∗ Y ∗ ⋅ 100 % = − k (u − u ∗) \frac(Y-Y^*)( Y^*)\cdot100\%= -k \left(u-u^* \right)Y ∗ Y- Y ∗ ⋅ 1 0 0 % = − k (u − u ∗ ) $
We get
K = Y ∗ − Y Y ∗ (u − u ∗) ⋅ 100 % k=\frac (Y^*-Y)( Y^*\left(u-u^* \right))\cdot100\%k =Y ∗ ( u − u ∗ ) Y ∗ − Y ⋅ 1 0 0 %
We carry out the calculation
k=\frac (10000-8000)( 10000*(6-4))\cdot100\%=10k =1 0 0 0 0 ∗ (6 − 4 ) 1 0 0 0 0 − 8 0 0 0 ⋅ 1 0 0 % = 1 0
When applying Okun's law, one should take into account the fact that the coefficient of proportionality used in the calculations is empirical in nature, its application is limited to a specific country, study period.
Okun's law- the assumption put forward by the American economist Arthur Oken that there is a relationship between the unemployment rate and the growth of the state's GDP, expressed in the fact that for every percentage of the excess of the unemployment rate over its natural level, there is a decrease in GDP compared to the level that could be achieved if unemployment were at the natural rate.
That is, labor resources that are not involved in the process of social production "do not contribute" to the level of GDP growth of the state. For the United States, this percentage is considered to be 2.5. That is, each percentage of unemployment above the natural rate reduces GDP by 2.5%.
For each state, the existence of a "natural" level of unemployment is assumed. That is, the level caused by the normal economic processes of labor migration, the population changing jobs, professions and other reasons. This level will exist in any case, regardless of the economic situation in the country. If the economic situation begins to deteriorate, then there is additional unemployment caused by a lack of jobs. It is precisely in terms of this excess over the "natural" level that the level of GDP losses is calculated.
This dependence was derived on the basis of statistical data and is not binding. It is carried out only on large time intervals and, by and large, cannot be considered a "law". But the presence of such a dependence demonstrates that unemployment causes significant harm to the potential growth of the state's economy. This relationship can also be used for the opposite purposes - understanding the natural rate of unemployment makes it possible to assess, through Okun's Law, the potential for GDP growth compared to the current situation.
Okun's Law Formula
(GDPf - GDPp) / GDPp = -K
where:
GDPf - the country's actual GDP
GDPp - potential GDP of the country
K - coefficient of dependence in relation to the excess of the unemployment rate.
In English notation, this formula looks like this:
(Y - Y") / Y" = -B
In practice, it is usually not this formula that is used, but the consequence from it:
(Y 0 - Y 1) / Y 0 = Y 0 (u 1 - u 0)
respectively,
Y 1 , Y 0- the level of GDP in the reporting period and potential GDP
u 1 , u 0- unemployment rate in the reporting period and natural unemployment rate
If you need to estimate potential GDP, then the formula takes the following form:
Y 0 \u003d Y 1 / (1 - B * (u 1 - u 0))
i.e
GDPp \u003d GDPf / (1 - K * (Uf - Uest))
Considering that this dependence is statistical and not mathematical, the use of formulas should be approached with caution.
Okun's law is used most often in the analysis of the economic situation. The scientist introduced this coefficient to characterize the ratio of the unemployment rate and the growth rate.
In 1962, Okun deduced a pattern based on empirical data. Statistics have shown that a 1% increase in unemployment can lead to a fall in actual gross domestic product in line with potential GDP by 2%. This ratio is not constant and differs depending on the country and time period.
Thus, Okun's law is the ratio of quarterly changes in the unemployment rate and real GDP.
Okun's law formula
The formula for Okun's law is as follows:
(Y’ – Y)/Y’ = с*(u – u’)
Here Y is the real volume of GDP,
Y' - potential GDP,
u is the real unemployment rate,
u' is the natural rate of unemployment,
c is the Okun coefficient.
Okun's ratio since 1955 in the US has usually been equated to 2 or 3.
This formula of Okun's law is used in rare cases, since the level of potential GDP and the unemployment rate are difficult indicators to estimate.
There is a second version of the formula of Okun's law:
∆Y/Y = k – c*∆u
Here Y is the actual volume of production,
∆Y is the change in the actual level of production compared to the previous year,
∆u is the change in the actual unemployment rate compared to the previous year,
c - Okun's coefficient,
k is the average annual growth of production under the condition of full employment.
Criticism of Okun's Law
Until now, Okun's law formula has not received recognition and is criticized by many economists who question its usefulness in the field of explaining market conditions.
The formula of Okun's law appeared as a result of the processing of statistical data, which are empirical observations. At the heart of the law there was no solid theoretical base, tested in practice, since Oken expressed the pattern only in the study of US statistics.
Statistics are approximate and gross domestic product can be affected by a large number of factors rather than a single unemployment rate.
However, this simplistic treatment of macroeconomic performance can often be useful, as Oken's study has shown.
Features of Okun's Law
The scientist derived a coefficient that reflects the inverse relationship between output and unemployment. Oken believed that 2% GDP growth is associated with the following shifts:
It can be noted that by reducing Okun's cyclical unemployment rate by 0.1%, the expected rate of increase in real GDP will be 0.2%. But for different states and time periods, this value will vary, since the dependence was practically tested for GDP and GNP.
Examples of problem solving
Unemployment rate - 10%,
Actual gross domestic product (GDP) - 7,500 billion rubles.
Difference between actual and natural unemployment rate:
That is, GDP lags behind its potential value by 8%. If we take the actual gross product as 100%, then we get the following result:
en.solverbook.com
Okun's law
Task number 38. Determining Government Policy to Stabilize the Economy
In the country's economy, the natural unemployment rate is 7%, and the actual rate is 9%. Potential GDP is $3000 billion, Okun's ratio is 2.5. What policy should the government pursue to stabilize the economy (consider all possible instruments), if it is known that the marginal propensity to consume is 0.9.
Task number 51. Calculation of potential GDP
The unemployment rate in the current year was 7.5%,
and actual GDP is $1,665 billion.
The natural rate of unemployment is 5%.
Determine the value of potential GDP if the Okun coefficient is 3.
Task number 52. Calculation of actual GDP
The unemployment rate in the current year was 6.5%.
The natural rate of unemployment is 5%,
and Okun's coefficient is 2.
Potential GDP is $2,550 billion.
Determine the gap in GDP (in %) and the loss of GDP due to cyclical unemployment (in billion dollars).
Task number 53. Calculation of the Okun coefficient and the natural rate of unemployment
Potential GDP was $100 billion, actual GDP was $97 billion, and the actual unemployment rate was 7%.
When actual GDP fell by $6 billion, the unemployment rate rose to 9%.
Determine the value of the Okun coefficient and the natural rate of unemployment.
Task number 54. Calculation of potential GDP, actual and natural unemployment rate
The country's economy is characterized by the following indicators:
total population of 400 million people,
the working-age population is 280 million,
the number of employees - 176 million,
the number of frictional unemployed - 6 million,
the number of structural unemployed - 8 million,
the number of cyclical unemployed is 10 million people.
Actual GDP is $2,040 billion, and the Okun coefficient is 3.
Determine the value of potential GDP, the actual unemployment rate, the natural unemployment rate.
Task number 55. Calculation of actual GDP and actual unemployment rate
total population - 200 million people,
the working-age population is 160 million people,
the number of employed - 112 million people,
natural unemployment rate - 6.4%,
the number of cyclical unemployed is 5 million people.
Potential GDP is $2,500 billion and the Okun ratio is 2.4.
Determine the actual GDP, the actual unemployment rate, the number of frictional and structural unemployed.
Task number 61. Calculation of losses from unemployment
The potential volume of output at a natural unemployment rate of 6% is equal to 6,000 billion den. units. With the appearance of cyclical unemployment of 1%, there is a deviation of the actual volume of output from the potential by 120 billion den. units. Determine the loss from unemployment if the actual unemployment rate is 8.5%
Decision
Solutions of problems according to Okun's law
The population of the country is 100 million people. The share of the labor force in the population is 55%. The productivity of one employed person is UAH 12,000 per year. Actual. The country's GDP is UAH 600 billion. The natural rate of unemployment is 5%. Determine the unemployment rate of the population.
M pc = 100 million people
2. The number of employees is determined by the formula:
where. GDPf - actual. GDP; h - productivity of one employed
3. Number of unemployed :
BW = 55 million people – 50 million people = 5 million people
4. The unemployment rate is calculated by the formula:
The natural rate of unemployment is 5%, while its actual rate is 7%. Determine. GDP gap, provided that the coefficient of sensitivity to the dynamics of cyclical unemployment is 2.5, and the actual one. GDP is 900 million December.
1. Find the percentage deviation of the actual. GDP from the natural result of cyclical unemployment according to the formula:
2. Now let's calculate natural. GDP:
GDP * 0.05 =. GDP * - 900
GDP * = UAH 947,360,000
So,. GDP-respawntime: 947.36
900 = 47.36 million UAH
Determine the unemployment rate in the national economy under the following conditions:
1) the population of the country is 100 million people;
2) population under the age of 16 - 20 million people;
3) are in special institutions - 4 million people;
4) natural. GDP — UAH 940 billion b) natural rate of unemployment — 6%;
6) actual. GDP is 85% natural. GDP;
7) persons who left the workforce - 26 million. Decision:
1. Determine the number of labor force:
2. Number of people employed according to the natural rate of unemployment: 50 million people
3. Then the productivity of one employed person:
4. Actual volume. GDP:
0.85 940 billion UAH = 799 billion UAH
5. Number of employees:
6. Number of unemployed:
BW \u003d 50 million people - 39950000 people \u003d 10050000 people
7. The unemployment rate is determined by the formula:
In 2000, the country's economy developed under conditions of full employment (natural unemployment rate of 6%). Actual. GDP was equal to potential and amounted to UAH 300 billion. In 2005 actual. GDP was UAH 371 1 billion, potential - UAH 412 billion in December.
In 2005, to determine the level of actual unemployment (with
1. Using the law. Okun, we calculate the actual unemployment rate using the formula:
2 will be the proportion:
3. Determine the unemployment rate:
The natural rate of unemployment in the country is 6%, the actual rate is 15%. Coefficient p = 2.5
Determine the relative lag of the actual. GDP from potential; losses. GDP caused by cyclical unemployment, if actual. GDP is UAH 150 billion
1. The volume of the relative backlog of the actual. GDP from potential is determined by the formula. Okena
2. The volume of the potential. GDP is
GDP * = UAH 193,550,000,000
3. The losses caused by cyclical unemployment are nothing but. GDP gap, we calculate it like this:
GDP gap = UAH 193,550,000,000 -
– 150 billion UAH = 43550000000 UAH
Tasks for self-fulfillment
In the reporting year, the labor resources of the region amounted to 1810 thousand people, including 1720 thousand people of working age; 120,000 people employed in the national economy (without private peasant farms), 129,000 students, 189,000 unemployed citizens of working age, including forcedly unemployed (looking for this slave) - 73 thousand axes. osib.
Determine the level of employment of the able-bodied population in the national economy of the region for the reporting year, the level of employment of students, the level of unemployed able-bodied citizens of working age, including those looking for a robot.
The unemployment rate in the region in the reporting year was 12%. It is necessary to reduce this figure to 5%. By using the law. Okun, calculate the required rate of change for this. GDP
If the unemployment rate is 7.8%, then at what pace should it grow. GDP to bring the unemployment rate down to 6.5%: a) in one year b) in two years?
Analyze the number of people employed in all types of economic activity and separately in trade in the western regions and in Ukraine as a whole for 2003-2007 pp (Table 1)
Using spreadsheets of the MS Excel package, build a calculation and analytical table in which to determine the specific gravity (in percent) of the chipped indicator. Construct a line chart illustrating the dynamics of changes in employees by type of economic activity.
Using spreadsheets of the MS Excel package, based on the indicators in Table 2, analyze the dynamics of the number of employed citizens in the western regions of Ukraine in 2003-2007 pp, and also calculate the share of women in the total number of employed people and draw conclusions.
Make a forecast for the next five years, using to build the model on. Your choice, statistical functions linest, trend, forecast, logest, growth. Conclusions are presented in the form of a linear diagram of the equation and the trend.
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Decision. Examples of problem solving;
Examples of problem solving
Formulas for solving problems
1. Okun's law formula
Y is the actual volume of production;
Y* is the potential volume of GNP;
u* is the natural rate of unemployment;
c is the empirical GNP sensitivity coefficient to the dynamics of cyclical unemployment;
2. The general level of labor resources is determined by the formula:
R is the actual availability of labor resources;
L is the working population;
3. The general level of the unemployed is determined by the formula:
U is the actual unemployment rate;
F - officially registered
R is the total number of people willing to work.
1. Actual GDP is $3,712 billion, potential GDP is $4,125. Determine the level of actual unemployment if the actual level is 6% (when b=2.5).
To determine the actual unemployment rate, we apply the formula of Okun's law:
After algebraic transformations:
Thus, the actual unemployment rate was 10%
2. Calculate cyclical unemployment under the following conditions: labor force - 4 million people, number of employed - 3.5 million people, natural unemployment - 6%. What will be the difference between actual and potential GDP under these conditions?
Problems in macroeconomics
Example 1. Suppose that in a given year the natural unemployment rate was 5%, and the actual rate was 9%. Using Okun's law, determine the magnitude of the backlog of GNP in percent. If nominal GNP in the same year was 50 billion rubles, how much output was lost due to unemployment.
Task No. 303 (calculation of inflation rate and price index)
If the price index was 110 last year and 121 this year, what will be the inflation rate this year? What does the "rule of magnitude 70" mean?
Task No. 18 (calculation of the unemployment rate)
The table presents data on labor resources and employment in the first and fifth years of the period under review (in thousand people): First year Fifth year.
Task No. 14 (calculation of macroeconomic indicators)
Problem No. 415 (Problem according to Okun's law)
Example 1. Suppose that in a given year the natural unemployment rate was 5%, and the actual rate was 9%. Using Okun's law.
Task No. 15 (calculation of GNP, NNP, consumption and investment)
National production includes two goods: X (consumer good) and Y (means of production). This year, 500 X units were produced.
Okun's Law is an economic law according to which a 1% increase in the proportion of unemployed in the total labor force above the natural rate of unemployment leads to a decrease in the volume of gross national product output by 2.5%. The excess of the actual unemployment rate over the natural rate is 4% (9% -5%), therefore, the lag in the volume of production of the gross national product is:
If the GNP in the same year was 50 billion rubles, then the volume of production that was lost due to unemployment was:
50*10/100=5 billion rubles
Example 2. Calculate, in accordance with Okun's law, the loss of actual GDP due to cyclical unemployment under the following conditions:
- actual unemployment - 8%;
- natural unemployment - 5%;
- nominal GDP – CU 900 billion;
- price index - 120%.
The excess of the actual unemployment rate over the natural rate is 3% (8%-5%), therefore, the loss in GDP is:
Actual (real) GDP, i.e. nominal GDP adjusted for the price index is:
GDPf=900/(120/100)=CU750 billion
So, if the actual size of GDP was CU750 billion, then the loss of GDP (i.e. the amount of output that was lost due to unemployment) was:
750*7.5/100=CU56.25 billion
Example 3. The economy is described by the following data: the natural unemployment rate is 6%, the actual unemployment rate is 7.33%, potential GDP increases by 3% per year. How fast must actual output increase in order to ensure full employment of resources next year at a natural rate of unemployment? The coefficient of sensitivity of GDP to the dynamics of cyclical unemployment is 3.
For every percent excess of the actual unemployment rate over the natural rate, the loss of GDP is 3% (this relationship is known as Okun's law). According to the condition of the problem, such an excess is 1.33% (7.33-6). Therefore, the GDP losses are equal to:
dGDP=1.33*3=4% of potential GDP.
Therefore, other things being equal, in order to achieve full employment, it is necessary that actual GDP be increased by an amount equivalent to 4% of potential GDP.
Next year, potential GDP increases by 3%, by the same 3%, in order to ensure full employment, it must be increased to actual GDP.
The total growth of actual GDP in this case should be equivalent to a value equal to 7% (4 + 3) of potential GDP.
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