A company has recently been hiring new employees. Today the company has 34% more employees than it did a year ago. If there are
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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:
The GDP gap at a given increase in unemployment can be estimated by the following expression:
Where:
- GDP gap-unemployment increase rate, dimensionless.
- Increase in unemployment rate, measured in percentage.
- GDP gap, measured in percentage.
If and
, the GDP gap is:
The GDP gap is 9 % when there is 4.5 % unemployment.