Find the best solutions to your questions at Westonci.ca, the premier Q&A platform with a community of knowledgeable experts. Experience the convenience of getting accurate answers to your questions from a dedicated community of professionals. Our platform offers a seamless experience for finding reliable answers from a network of knowledgeable professionals.
Sagot :
Answer:
a. 18 percent
b. $90 billion
Step-by-step explanation:
a. Calculation to use Okun's law to determine the size of the GDP gap in percentage-point terms.
First step is to find the difference between ACTUAL RATE of unemployment and NATURAL RATE of unemployment
Difference=13%-4%
Difference= 9%
Based on the information above calculation we can see that the ACTUAL RATE of unemployment EXCEEDS the NATURAL RATE of unemployment by 9%, which indicates a CYCLICAL UNEMPLOYMENT.
Thus, According to Okun's law, this translates into an 18 % GDP gap in percentage-point terms (= 2 × 9%).
Therefore the the size of the GDP gap in percentage-point terms is 18 percent
b. Calculation to determine how much output is forgone because of cyclical unemployment
Forgone Output :
By applying Okun’s law we known that the GDP gap is 18%, which means that we are 18% below the GDP amount which is given as $500 billion,
Hence,
Output forgone = (18/100) ×$500 billion
Output forgone=0.18×$500 billion
Output forgone=$90 billion
Therefore the Forgone Output is $90 billion
We hope this information was helpful. Feel free to return anytime for more answers to your questions and concerns. Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. Thank you for choosing Westonci.ca as your information source. We look forward to your next visit.