In Macroland, a country whose economy operates according to Okun's law, potential GDP equals $10 trillion, the actual rate of unemployment is 8 percent, and the natural unemployment rate is 6 percent. What is real actual GDP in Macroland?
A)$9.6 trillion
B)$9.8 trillion
C)$10 trillion
D)$10.2 trillion

Question

Quizplus · Accepted Answer

This problem applies Okun's law. Actual unemployment is 2 percentage points above the natural rate. This results in a 4 percent negative output gap. Since GDP potential is $10 trillion, actual GDP is 96 percent of this, or $9.6 trillion.

In Macroland, a Country Whose Economy Operates According to Okun's