Question

In 1948, there were 48,049 full time equivalent employees working, while in 2015 there were 131,107.

In 1948, the real GDP was 274.28 (given in year 2009 dollars), while real GDP was 18,037 in 2015.

Calculate the average annual growth rate for employment and compare to another calculation you do to the average annual growth rate for real GDP. Why should anyone care about the results you obtain?

Answer 1

Effective annual rate of employment growth is

(Employment in 2015- Employement in 1948)÷(Employement in 1948)^(1/67)=((131107-48049)÷48049)^(1/67)=0.82%

Effective annual growth rate of GDP=((18037-274.28)÷274.28)^(1/67)=(17 762.72/274.28)^(1/67)=1.064

Annual growth rate is 6.4%

As per Okun 's law growth rate of GDP and unemployment are negatively related i.e in this economy Employement rate isn't much this economy has more potential to increase the GDP rate than existing rate . As per my consideration this economy is operating below it's potential GDP levels.