Question

According to okun’s law, how much output (real gdp) was lost in 2009 when the nation’s unemployment rate increased from 5.8 percent to 9.3 percent? (real gdp in 2009 was $14,419 billion).

Answer 1

Answer: Decline in GDP = $1009.3 billion

Step-by-step explanation:

Okun's law shows us the relationship between a nation's unemployment rate and its level of output or real GDP.

According to the Okun's law,

`Loss in GDP=  2* (9.3 - 5.8) = 7%`

Therefore, a 7% decline in GDP as compared to the level in 2009 means,

`Change in GDP = -0.07 * 14419 billion`

= 1009.33 billion or 1009.3 billion

Thus, GDP declined by $1009.3 billion.