Question #146700
The economy of Omega operates according to Okun's law. Omega is currently
experiencing a recessionary gap of 2% of potential GDP. If the natural rate of
unemployment equals 6 percent, what is the actual rate of unemployment in Omega?
experiencing a recessionary gap of 2% of potential GDP. If the natural rate of
unemployment equals 6 percent, what is the actual rate of unemployment in Omega?
Expert's answer
The GDP is 2% below, meaning that the unemployment rate is 1% above the natural rate of employment.
Hence the actual rate of employment =6%+1%
=7%
Actualrateofunemployment=7%
