If the natural rate of unemployment was 7 percent, the current unemployment rate was 12 percent, and the nominal GDP was $4,000 billion, then according to Okun's law the economy would have sacrificed:

Question

Quizplus · Accepted Answer

According to Okun's law, for every 1% increase in the unemployment rate above the natural rate, a country's GDP will be roughly an additional 2% lower than its potential GDP. The unemployment rate is 5% above the natural rate (12% - 7%), so the economy sacrifices 10% of potential GDP (5% * 2%). Therefore, 10% of $4,000 billion is $400 billion.

If the Natural Rate of Unemployment Was 7 Percent, the Current