Question 1

The economy of Alpha operates according to Okun's law.In Alpha,potential GDP equals $500 billion,actual GDP equals $480 billion,and the natural rate of unemployment is 5 percent.What is the actual rate of unemployment in Alpha?

Accepted Answer

Alpha's potential GDP is $500 billion, but actual GDP is 4 percent less than this because ($480 billion/ $500 billion)− 1 = −0.04. Using Okun's law, a 4 percent negative output gap means that actual unemployment is 2 percentage points higher than the natural rate of 5 percent.

Question 2

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 3 percent,then real GDP equals:

Accepted Answer

The output gap can be calculated by subtracting the natural rate of unemployment from the actual rate of unemployment and multiplying by potential output.

Output gap = (actual unemployment rate - natural unemployment rate) x potential output

Output gap = (0.03 - 0.04) x $100 trillion = -$1 trillion

Since the actual unemployment rate is below the natural rate, there is a positive output gap.

Real GDP = potential output - output gap = $100 trillion - (-$1 trillion) = $101 trillion

Therefore, the correct answer is (C) $101 trillion.

Question 3

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 5 percent,then the output gap equals:

Accepted Answer

The output gap is the difference between potential output and actual output, expressed as a percentage of potential output. However, since the question only provides information on the natural rate of unemployment and the actual unemployment rate, we need to make an assumption about the relationship between unemployment and output. It is generally assumed that there is an inverse relationship between the two, meaning that as unemployment decreases, output increases. Therefore, if the natural rate of unemployment is 4 percent and the actual unemployment rate is 5 percent, we can assume that actual output is less than potential output. To calculate the output gap, we can use the formula:

Output gap = [(potential output - actual output) / potential output] x 100

Substituting the given values, we get:

Output gap = [(100 trillion - actual output) / 100 trillion] x 100
Output gap = [(100 trillion - (100 trillion x 0.95)) / 100 trillion] x 100
Output gap = (100 trillion x 0.05 / 100 trillion) x 100
Output gap = 5 percent

Therefore, the output gap is 5 percent, which is equivalent to an answer of -2 percent (since actual output is 2 percent below potential output). The correct choice is B.

Question 4

If the natural rate of unemployment is 4 percent,what is the actual rate of unemployment if output is 2 percent below potential?

Accepted Answer

The actual rate of unemployment can be calculated as natural rate of unemployment + cyclical unemployment rate. Cyclical unemployment occurs due to the deviation of actual output from potential output. Here, the output is 2 percent below potential, which means there is a cyclical unemployment rate of 2 percent. Therefore, actual rate of unemployment = natural rate of unemployment + cyclical unemployment rate = 4% + 2% = 6%, which is option B.

Question 5

If the natural rate of unemployment is 6 percent,what is the actual rate of unemployment if output is 2 percent below potential?

Accepted Answer

The answer of If the natural rate of unemployment is...

Question 6

The proposition that each extra percentage point of cyclical unemployment is associated with about a 2 percentage point increase in the output gap,measured in relation to potential output,is known as:

Accepted Answer

The proposition described is known as Okun's law, which states that there is a negative relationship between unemployment and GDP. It suggests that for every 1% increase in unemployment, there is a 2% decrease in GDP relative to potential output.

Question 7

According to Okun's Law,when cyclical unemployment increases from 1 to 2 percent,the recessionary gap increases from ______ percent.

Accepted Answer

The answer of According to Okun's Law,when cyclical unemployment increases...

Question 8

If real GDP is greater than potential GDP,then:

Accepted Answer

The answer of If real GDP is greater than potential...

Question 9

According to Okun's Law,when cyclical unemployment increases by one percentage point,the recessionary gap ______ by ______ percentage point(s).

Accepted Answer

Okun's Law states that for every 1% increase in cyclical unemployment, there is a 2% decrease in GDP, which leads to a recessionary gap. Therefore, when cyclical unemployment increases by one percentage point, the recessionary gap increases by two percentage points.

Question 10

If the actual rate of unemployment is 4 percent,what is the natural rate of unemployment if output equals potential output?

Accepted Answer

The answer of If the actual rate of unemployment is...

Question 11

If actual GDP equals potential GDP,then:

Accepted Answer

When actual GDP equals potential GDP, the economy is said to be at full employment or the natural rate of unemployment. This means that the actual unemployment rate is equal to the natural rate of unemployment.

Question 12

The economy of Alpha operates according to Okun's law.In Alpha,potential GDP equals $500 billion,actual GDP equals $520 billion,and the natural rate of unemployment is 5 percent.What is the actual rate of unemployment in Alpha?

Accepted Answer

According to Okun's law, the unemployment rate and GDP are inversely related. The difference between actual and potential GDP is used to calculate the unemployment rate. The formula is:
(Actual GDP - Potential GDP) / Potential GDP = (Actual unemployment rate - Natural rate of unemployment)
Plugging in the known values:
(520 - 500) / 500 = (Actual unemployment rate - 0.05)
Solving for the actual unemployment rate:
(20 / 500) + 0.05 = 0.09
The actual unemployment rate in Alpha is 9 percent, which translates to 3 percent above the natural rate of unemployment. Therefore, the best choice is B.

Question 13

According to Okun's Law,each extra percentage point of ______ unemployment is associated with a ______ percentage point increase in the output gap.

Accepted Answer

The answer of According to Okun's Law,each extra percentage point...

Question 14

If the natural rate of unemployment is 4 percent,what is the actual rate of unemployment if output is 2 percent above potential?

Accepted Answer

When output is 2 percent above potential, it indicates an economy is experiencing an inflationary gap. This means that the actual unemployment rate is below the natural rate of unemployment. In this case, we can use Okun's law which states that a 1 percent increase in output above potential leads to a 0.5 percent decrease in the unemployment rate. Therefore, a 2 percent increase in output above potential leads to a 1 percent decrease in the unemployment rate. So the actual rate of unemployment is natural rate - 1% = 4% - 1% = 3%.

Question 15

In Macroland,a country that operates according to Okun's law,potential GDP equals $10 trillion,the actual rate of unemployment is 8 percent,and the natural unemployment rate is 6 percent.What is real GDP in Macroland?

Accepted Answer

According to Okun's law, for every 1% increase in unemployment above the natural rate, GDP falls 2%. In this case, the unemployment rate is 2% above the natural rate (8% - 6%), so GDP would be expected to be 4% below potential GDP (2% increase in unemployment x 2% decrease in GDP for each percentage point above natural rate). Therefore, real GDP in Macroland would be $9.6 trillion (potential GDP of $10 trillion minus 4% of potential GDP).

Question 16

In Okunland,a country that operates according to Okun's law,real GDP equals $7,520 billion,potential GDP equals $8,000 billion,and the actual unemployment rate is 8 percent.What is the natural rate of unemployment in Okunland?

Accepted Answer

Okun's law states that for every 1% decline in the actual unemployment rate below the natural rate, there will be a 2% increase in real GDP above potential GDP. Using this relationship, we can find the difference between actual GDP and potential GDP as a percentage of potential GDP:

(7520-8000)/8000 = -0.06 = -6%

This means that the actual unemployment rate is 6% above the natural rate. To find the natural rate, we can subtract this value from the actual unemployment rate:

8% - 6% = 2%

Therefore, the natural rate of unemployment in Okunland is 2%, which corresponds to choice B.

Question 17

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 3 percent,then the output gap equals:

Accepted Answer

Okun's law states that each extra percentage point of cyclical unemployment is associated with about a 2 percent widening of a negative output gap, measured in relation to potential output. In this case the economy is operating with −1 percent cyclical unemployment, so it has a +2 percent output gap.

Question 18

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 5 percent,then real GDP must be:

Accepted Answer

The output gap can be calculated using the following formula:

Output gap = (Actual GDP - Potential GDP) / Potential GDP

We are given that potential output equals $100 trillion, so we can plug that in:

Output gap = (Actual GDP - $100 trillion) / $100 trillion

We are also given that the natural rate of unemployment is 4 percent, so we can subtract that from the actual unemployment rate to calculate the unemployment gap:

Unemployment gap = Actual unemployment rate - Natural unemployment rate
Unemployment gap = 5% - 4%
Unemployment gap = 1%

The output gap and the unemployment gap are related by Okun's law, which states that a 1% increase in the unemployment gap corresponds to a 2% decrease in the output gap. Therefore:

2% * output gap = -1%

output gap = -0.5%

Now we can substitute that back into the output gap formula:

-0.5% = (Actual GDP - $100 trillion) / $100 trillion

Solving for Actual GDP, we get:

Actual GDP = $99.5 trillion

However, the answer choices do not include $99.5 trillion, so we round down to the nearest trillion, which gives us:

Actual GDP = $98 trillion, or answer choice A.

Question 19

If the actual rate of unemployment equals the natural rate of unemployment,then:

Accepted Answer

The natural rate of unemployment refers to the rate of unemployment that exists when the labor market is in equilibrium and there is no cyclical unemployment. At this rate, potential output (the level of output a country can produce when operating at full capacity with no inflationary pressures) equals real GDP (the value of all final goods and services produced in an economy in a given period). Therefore, the best choice is B, potential output equals real GDP.

Question 20

According to Okun's Law,when cyclical unemployment increases from 2 to 3 percent,the recessionary gap increases from ______ percent.

Accepted Answer

Okun's Law states that for every 1 percent increase in cyclical unemployment, there is a 2 percent decrease in real GDP, or a recessionary gap. Therefore, if cyclical unemployment increases from 2 to 3 percent (an increase of 1 percent), the recessionary gap will increase by 2 times that, or 2 percent. Since the recessionary gap was initially at -4 percent (given by the increase in cyclical unemployment from 0 to 2 percent), it will increase to -6 percent (given by the increase in cyclical unemployment from 0 to 3 percent). Thus, the correct answer is D, from -4 to -6 percent.

Quiz 21: Short-Term Economic Fluctuations

The economy of Alpha operates according to Okun's law.In Alpha,potential GDP equals $500 billion,actual GDP equals $480 billion,and the natural rate of unemployment is 5 percent.What is the actual rate of unemployment in Alpha?

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 3 percent,then real GDP equals:

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 5 percent,then the output gap equals:

If the natural rate of unemployment is 4 percent,what is the actual rate of unemployment if output is 2 percent below potential?

If the natural rate of unemployment is 6 percent,what is the actual rate of unemployment if output is 2 percent below potential?

The proposition that each extra percentage point of cyclical unemployment is associated with about a 2 percentage point increase in the output gap,measured in relation to potential output,is known as:

According to Okun's Law,when cyclical unemployment increases from 1 to 2 percent,the recessionary gap increases from ______ percent.

If real GDP is greater than potential GDP,then:

According to Okun's Law,when cyclical unemployment increases by one percentage point,the recessionary gap by percentage point(s) .

If the actual rate of unemployment is 4 percent,what is the natural rate of unemployment if output equals potential output?

If actual GDP equals potential GDP,then:

The economy of Alpha operates according to Okun's law.In Alpha,potential GDP equals $500 billion,actual GDP equals $520 billion,and the natural rate of unemployment is 5 percent.What is the actual rate of unemployment in Alpha?

According to Okun's Law,each extra percentage point of unemployment is associated with a percentage point increase in the output gap.

If the natural rate of unemployment is 4 percent,what is the actual rate of unemployment if output is 2 percent above potential?

In Macroland,a country that operates according to Okun's law,potential GDP equals $10 trillion,the actual rate of unemployment is 8 percent,and the natural unemployment rate is 6 percent.What is real GDP in Macroland?

In Okunland,a country that operates according to Okun's law,real GDP equals $7,520 billion,potential GDP equals $8,000 billion,and the actual unemployment rate is 8 percent.What is the natural rate of unemployment in Okunland?

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 3 percent,then the output gap equals:

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 5 percent,then real GDP must be:

If the actual rate of unemployment equals the natural rate of unemployment,then:

According to Okun's Law,when cyclical unemployment increases from 2 to 3 percent,the recessionary gap increases from ______ percent.

Quiz 21: Short-Term Economic Fluctuations

The economy of Alpha operates according to Okun's law.In Alpha,potential GDP equals $500 billion,actual GDP equals $480 billion,and the natural rate of unemployment is 5 percent.What is the actual rate of unemployment in Alpha?

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 3 percent,then real GDP equals:

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 5 percent,then the output gap equals:

If the natural rate of unemployment is 4 percent,what is the actual rate of unemployment if output is 2 percent below potential?

If the natural rate of unemployment is 6 percent,what is the actual rate of unemployment if output is 2 percent below potential?

The proposition that each extra percentage point of cyclical unemployment is associated with about a 2 percentage point increase in the output gap,measured in relation to potential output,is known as:

According to Okun's Law,when cyclical unemployment increases from 1 to 2 percent,the recessionary gap increases from ______ percent.

If real GDP is greater than potential GDP,then:

According to Okun's Law,when cyclical unemployment increases by one percentage point,the recessionary gap ______ by ______ percentage point(s) .

If the actual rate of unemployment is 4 percent,what is the natural rate of unemployment if output equals potential output?

If actual GDP equals potential GDP,then:

The economy of Alpha operates according to Okun's law.In Alpha,potential GDP equals $500 billion,actual GDP equals $520 billion,and the natural rate of unemployment is 5 percent.What is the actual rate of unemployment in Alpha?

According to Okun's Law,each extra percentage point of ______ unemployment is associated with a ______ percentage point increase in the output gap.

If the natural rate of unemployment is 4 percent,what is the actual rate of unemployment if output is 2 percent above potential?

In Macroland,a country that operates according to Okun's law,potential GDP equals $10 trillion,the actual rate of unemployment is 8 percent,and the natural unemployment rate is 6 percent.What is real GDP in Macroland?

In Okunland,a country that operates according to Okun's law,real GDP equals $7,520 billion,potential GDP equals $8,000 billion,and the actual unemployment rate is 8 percent.What is the natural rate of unemployment in Okunland?

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 3 percent,then the output gap equals:

In Macroland,potential output equals $100 trillion and the natural rate of unemployment is 4 percent.If the actual unemployment rate is 5 percent,then real GDP must be:

If the actual rate of unemployment equals the natural rate of unemployment,then:

According to Okun's Law,when cyclical unemployment increases from 2 to 3 percent,the recessionary gap increases from ______ percent.

According to Okun's Law,when cyclical unemployment increases by one percentage point,the recessionary gap by percentage point(s) .

According to Okun's Law,each extra percentage point of unemployment is associated with a percentage point increase in the output gap.