February 5, 2016
GDP Gap
it is the amount by which actual GDP falls short of potential GDP.
- (ARU-NRU)*2=GDP Gap
Okun's Law
for every 1% by which actual unemployment rate exceeds the natural rate of unemployment (NRU), a GDP gap of about 2% occurs.
Ex: in 2012, the unemployment rate for Mexico is 7.4%.
- The NRU for Mexico is 6%.
- 7.4 - 6 =1.4
- 1.4 x 2 = 2.8% GDP gap
Rule of 70
used to determine how many years it will take for a value to double given a particular annual growth rate
Ex: If you put $20,000 in the bank and it earns you a yearly interest rate of 7% how many years will it take for your income to double
- 70/7 = 10
I like how you made it personal with the emoji things but next time can you put what things like ARU stand for.
ReplyDeleteI love your blog! I didn't fully understand what rule of 70 was until today. Now I know that 70 divided by the percentage of annual growth will give you the answer to the amount of years it takes to double.
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