If the natural unemployment rate is 5 percent, the actual unemployment rate is 8 percent, and potential GDP is $15 trillion, then according to Okun's Law, real GDP is

Question

Quizplus · Accepted Answer

Okun's Law suggests that 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. Here, the unemployment rate is 3% above the natural rate, so GDP is approximately 6% below potential GDP. 6% of $15 trillion is $0.9 trillion, so real GDP is $15 trillion - $0.9 trillion = $14.1 trillion.

If the Natural Unemployment Rate Is 5 Percent, the Actual