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- Suppose that the natural rate of unemployment in a particular year is 5 percent and the actual rate of unemployment is 9 percent. What will be the amount of cyclical unemployment and the size of the GDP gap in percentage-point terms, according to Okun law? Select one: a. 45 % cyclical unemployment, 9/5 percent GDP gap b. 4 % cyclical unemployment, 8 percent GDP gap c. 5 % cyclical unemployment, 10 percent GDP gap d. 5 % cyclical unemployment, 9 percent GDP gapThe natural rate of unemployment is 6%, and the actual unemployment rate is 9%, Okun's coefficient for this country is 3. If the potential GDP this year is 1600 billion Euros, what amount of output was lost due to unemployment?The version of Okun's law discussed in class implies that with no change in unemployment, real GDP growth is 3 percent. If the unemployment rate rose by 2 percentage points, Okun's law predicts that real GDP would: a. decreased by 4 percent b. decrease by 2 percent c. increase by 1 percent d. decrease by 1 percent
- In Okunland, a country whose economy 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? Multiple Choice 11 percent 2 percent 5 percent 6 percentUsing the information below, answer questions 1 & 2 Okun’s Law, which describes the relationship between Real GDP growth and the change in the unemployment rate and may be approximated as follows: Real GDP Growth = 3 – 2*Change in unemployment rate This relationship applies to changes from year to year. The average unemployment rate in the 12 months of 2019 was 3.7%. The average unemployment rate during the 12 months of 2020 was 5.9%. 1. What does Okun’s Law imply will be the rate of Real GDP growth between 2019 and 2020? Explain your answer. 2. How does this prediction compare to the actual rate of Real GDP growth between 2019 and 2020?According to Okun’s Law, how much must U.S. real GDP grow in 1 year in order for the U.S. unemployment rate to decline by 1.5 percentage points in 1 year? According to Okun’s Law, how much must U.S. real GDP grow in 1 year in order for the U.S. unemployment rate to decline by 1.5 percentage points in 1 year? 6% 7% 5% 4%
- What is the relationship between potential output and the natural rate of unemployment? a. If the economy currently has a frictional unemployment rate of 2 percent, structural unemployment of 2 percent, seasonal unemployment of 2 percent what is the natural rate of unemployment? Where is the economy operating relative to its potential GDP? b. What happens to the natural rate of unemployment and potential GDP if cyclical unemployment rises to 3 percent with other types of unemployment unchanged from part a? c. What happens to the natural rate of unemployment and potential GDP if structural unemployment falls to 1.5 percent with other types of unemployment unchanged from part a?The typical sacrifice ration is considered to be 5% points of GDP lost for every 1% decline in inflation. Also , Okun's laws says that 1% point of unemployment translates into 2% point of GDP .Under the typical sacrifice ratio a reduction in inflation of 6% points would entail a 30% decline in GDP and a 15% increase in the unemployment rate . However, the recent crisis has forced the government to increase inflation by 3% in order to lower unemployment by 2%, then one could calculate the actual sacrifice ration in this case to be. a) a loss of 5% of GDP b) a gain of 4% of GDP c) a loss of 3.17% of GDP d) a gain of 1.33% of GDPWhich of the following statements is true? A) The Okun’s law describes the positive relationship between GDP growth and inflation B) The Okun’s law describes the negative relationship between inflation and unemployment C) Inflation and GDP growth are negatively related D) The Okun’s law describes the negative relationship between GDP growth and unemployment
- Assume that in a particular year the natural rate of unemployment is 5 percent and the actual rate of unemployment is 9 percent. Use Okun’s law to determine the size of the GDP gap in percentage-point terms. If the nominal GDP is $500 billion in that year, how much output is being foregone because of cyclical unemployment?Suppose the Farsighted Forecasting Group, an organization of private economists, predicts that the output gap will fall by 4 percent over the next year. According to Okun’s Law, by how much is the unemployment rate likely to rise?Assuming the equilibrium unemployment rate is 5%, if actual output falls to 5 percentage points below potential output, how would you expect the unemployment rate to change? (Hint: Use Okun’s rule of thumb.)