Question

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 by1% B) it will decrease by 1% C) it will decrease by 7% D) it will increase by 7%

Answer 1

it will increase by 7%

Explanation:

this is the correct one I listened to the one above and i got it wrong

Answer 2

Delta(Y)/Y = 0.05 -2Delta(u)

=0.05-2(0.05-0.03) = 0.05-0.04 = 0.01 = 1%

So output (GDP) will increase by 1%