If the natural unemployment rate is 4 per cent and potential GDP is $30 billion then,according to Okun's Law,when the unemployment rate falls to 3 per cent,real GDP

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Okun's Law states that for every 1% decrease in the unemployment rate below the natural rate, real GDP will increase by 2%. In this case, a decrease in the unemployment rate from 4% to 3% is a decrease of 1%, which means real GDP will increase by 2%, or $600 million ($30 billion x 2% = $600 million). Therefore, real GDP will increase from $30 billion to $30.6 billion.

If the Natural Unemployment Rate Is 4 Per Cent and Potential