Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = $\$ 200$ Billion
Natural Rate of Unemployment $= 6$ Percent
Actual Rate of Unemployment $= 12$ Percent Refer to the given data.The size of the negative GDP gap as a percent of potential GDP for the economy is:

Question

Quizplus · Accepted Answer

Okun's law states that for every 1 percent increase in the unemployment rate above the natural rate, there will be a 2 percent decrease in the GDP gap relative to potential GDP. In this case, the unemployment rate is 3 percent above the natural rate (i.e. there is a 3 percentage point negative GDP gap) which implies a 6 percent decrease in actual GDP relative to potential GDP. Therefore, the size of the negative GDP gap as a percent of potential GDP for the economy is 12 percent (i.e. 6 percent of potential GDP is equivalent to the 3 percentage point negative GDP gap).

Answer the Question on the Basis of the Following Information $200\$ 200$200

Answer the Question on the Basis of the Following Information $\$ 200$