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Ivenika [448]
2 years ago
6

The natural rate of unemployment is 4%, and the economy is producing 95% of its potential output. Okun's law predicts an unemplo

yment rate of _____%.
A. 4
B. 5
C. 6.5
D. 9
Business
1 answer:
Anon25 [30]2 years ago
6 0

Answer:

so correct option is C. 6.5

Explanation:

given data

natural rate of unemployment = 4%

economy producing = 95%

solution

we know here as  Okun's law for the every 1 percentage increase in unemployment rate

GDP of country =  2% lower than potential GDP

but here is country GDP = 5% lower than potential GDP

so there is increase in the unemployment rate = 5% ÷ 2 =  2.5%  

and unemployment rate is given =  4%

so effective unemployment rate will be

effective unemployment rate = 4% + 2.5%

effective unemployment rate = 6.5%

so correct option is C. 6.5

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