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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 by 7%.
B. It will decrease by 7%.
C. It will decrease by 1%.
D. It will increase by 1%.

Sagot :

MrRoyalidn

Answer:

D. It will increase by 1%.

Step-by-step explanation:

Given

[tex]u_1 = 5\%[/tex] --- initial rate

[tex]u_2 = 3\%[/tex] --- final rate

Required

The effect on the GDP

To calculate this, we make use of:

[tex]\frac{\triangle Y}{Y} = u_1 - 2\triangle u[/tex]

This gives:

[tex]\frac{\triangle Y}{Y} = 5\% - 2(5\% - 3\%)[/tex]

[tex]\frac{\triangle Y}{Y} = 5\% - 2(2\%)[/tex]

[tex]\frac{\triangle Y}{Y} = 5\% - 4\%[/tex]

[tex]\frac{\triangle Y}{Y} = 1\%[/tex]

This implies that the GDP will increase by 1%

Maryamahmed7913idn

Answer: A. It will increase by 7%.

Step-by-step explanation: took the quiz and got this answer right.

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