According to Okun's law,if full-employment output is $5000 billion,then each percentage point of unemployment sustained for one year reduces output by
A)$50 billion.
B)$100 billion.
C)$150 billion.
D)$200 billion.

Question

Quizplus · Accepted Answer

Okun's law states that for every percentage point of unemployment above the natural rate, there is a negative GDP gap of 2%. This means that if the full-employment output is $5000 billion, then the natural rate of unemployment would be about 5%. If the actual unemployment rate is 6%, then there is a negative GDP gap of 2% (6% - 5% = 1%; 2% x 1% = 0.02). Therefore, the reduction in output would be 0.02 x $5000 billion = $100 billion.

According to Okun's Law,if Full-Employment Output Is $5000 Billion,then Each