Question

The previous year had an unemployment rate of 14.1%, nominal GDP of $28.9 trillion, and real GDP of $26.1 trillion. If the unemployment rate changes to 18.6% and overall price levels remain constant, which choice below could be the current year nominal GDP?

(a).$39.3 trilion
(b).$39.2 trillion
(c).$39.1 trilion
(d).$28.0 trilion

Answer 1

If the unemployment rate changes to 18.6% and overall price levels remain constant, the current year nominal GDP can be calculated using the formula (Real GDP / (1 - Unemployment Rate)).

Step-by-step explanation:

If the unemployment rate changes to 18.6% and overall price levels remain constant, the previous year nominal GDP of $28.9 trillion can be used to calculate the current year nominal GDP. We can use the formula: (Real GDP / (1 - Unemployment Rate)). So, using the given information, the current year nominal GDP would be approximately $31.3 trillion. Therefore, none of the choices provided are correct.