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24 June, 07:28

According to okun's law if the unemployment rate goes from 5% to 3% what will be the effect on the GDP? A) it will increase by1% B) it will decrease by 1% C) it will decrease by 7% D) it will increase by 7%

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  1. 24 June, 07:48
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    Delta (Y) / Y = 0.05 - 2Delta (u)

    =0.05-2 (0.05-0.03) = 0.05-0.04 = 0.01 = 1%

    So output (GDP) will increase by 1%
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