$$\begin{array} { | l | c | }
\hline \text { Potential Real GDP } & \$ 200 \text { Billion } \
\hline \text { Natural Rate of Unemployment } & 6 \% \
\hline \text { Actual Rate of Unemployment } & 12 \% \
\hline
\end{array}$$ Refer to the accompanying data, which is for a speci?c year in a hypothetical economy for which Okun's law is applicable. The amount of output being forgone by the economy is
A) $12 billion.
B) $15 billion.
C) $18 billion.
D) $24 billion.

Question

$$\begin{array} { | l | c | } 
\hline \text { Potential Real GDP } & \$ 200 \text { Billion } \
\hline \text { Natural Rate of Unemployment } & 6 \% \
\hline \text { Actual Rate of Unemployment } & 12 \% \
\hline
\end{array}$$ Refer to the accompanying data, which is for a speci?c year in a hypothetical economy for which Okun's law is applicable. The amount of output being forgone by the economy is
A) $12 billion.
B) $15 billion.
C) $18 billion.
D) $24 billion.

Quizplus · Accepted Answer

Okun's law states 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. The unemployment gap is 6% (12% - 6%), so the GDP gap is 12% (6% * 2). 12% of $200 billion is $24 billion.

Refer to the Accompanying Data, Which Is for a Speci?c