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.If the unemployment rate in the economy fell to 6 percent,we could conclude that:

Question

Quizplus · Accepted Answer

This is because Okun's law states that for every 1 percent decrease in the unemployment rate, there is a 2 percent increase in real GDP. Therefore, if the unemployment rate fell from a higher level to 6 percent, it implies that the economy has moved closer to full employment, which means that the economy is producing closer to its potential. Hence, the economy had moved from a point inside its production possibilities curve to a point on or very near the curve.

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

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