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17 October, 09:30

Potential real gdp = $200 billion natural rate of unemployment = 6 percent actual rate of unemployment = 12 percent refer to the accompanying data, which is for a specific year in a hypothetical economy for which okun's law is applicable. the size of the negative gdp gap as a percentage of potential gdp for the economy is

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  1. 17 October, 09:43
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    12%

    Explanation:

    Given that,

    Potential real GDP = $200 billion

    Natural rate of unemployment = 6 percent

    Actual rate of unemployment = 12 percent

    Okun's law refers to the law which states the relationship between the losses in the production of a particular nation and the unemployment.

    It also indicates that for every 1 percent, the actual rate of unemployment exceeds the natural rate of unemployment, then as a result there is a GDP gap of 2% is generated.

    Cyclical unemployment:

    = Actual rate of unemployment - Natural rate of unemployment

    = 12% - 6%

    = 6%

    Negative GDP gap:

    = 6% * 2

    = 12%

    Therefore, the of the negative GDP gap as a percentage of potential GDP for the economy is 12%.
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