What is the formula used?

Anonymous
timer Asked: Aug 10th, 2014
account_balance_wallet $5

Question Description

In Okunland, a country that operates according to Okun's law, if the natural rate of unemployment is 4 percent, what is the actual rate of unemployment if output is 2 percent above potential? 

Answer: 3%

Tutor Answer

madhavant
School: Carnegie Mellon University

2(actual unemployment-natural unemployment )=(potential GDP-actual GDP)/Potential GDP*100%

2(x-4)=-2 Since actual is above potential

(x-4) =-1  

x=4-1=3

Actual rate of unemployment =3%

Ref:

http://wiki.ubc.ca/Okun's_Law


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Review

Anonymous
Thanks, good work

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