Suppose the natural rate of unemployment is 4 percent. What is the actual rate of unemployment if actual output is 2 percent below potential output?
A)3 percent
B)5 percent
C)6 percent
D)8 percent

Question

Quizplus · Accepted Answer

This problem applies Okun's law. If output is 2 percent below its potential, then unemployment is one percent higher than its full-employment level of 4 percent.

Suppose the Natural Rate of Unemployment Is 4 Percent