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dusya [7]
3 years ago
15

For every 1% increase in

Mathematics
1 answer:
givi [52]3 years ago
3 0

Answer:

The GDP gap is 9 % when there is 4.5 % unemployment.

Step-by-step explanation:

The statement shows a reverse relationship, where an increase in unemployment is following by decrease in potential GDP and can be translated into the following rate:

r = \frac{2\,\% \,GDP}{1\,\% unemp.}

The GDP gap at a given increase in unemployment can be estimated by the following expression:

\frac{g}{u} = r

g = r\cdot u

Where:

r - GDP gap-unemployment increase rate, dimensionless.

u - Increase in unemployment rate, measured in percentage.

g - GDP gap, measured in percentage.

If r = \frac{2\,\% \,GDP}{1\,\% unemp.} and u = 4.5\,\%\,unemp., the GDP gap is:

g = \left(\frac{2\,\%\,GDP}{1\,\%\,unemp.} \right)\cdot (4.5\,\%\,unemp.)

g = 9\,\%\,GDP

The GDP gap is 9 % when there is 4.5 % unemployment.

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