Answer to Question #130111 in Economics for Michael Fuachie

Question

Assume that in a particular year, the natural rate of unemployment is 5 percent and the actual rate of unemployment is 9 percent. Use the Okun’s law to estimate the size of GNP gap in percentage point terms. If the potential GNP is 500 billion in that year, how much output is being foregone because of cyclical unemployment?

Answer 1

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