Question

Assume that the natural unemployment rate and​ full-employment output are constant.

Assume that the natural unemployment rate and​ full-employment output are constant.

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Answer #1

Ans: 6%

Explanation:

Formula for Okum's Law = 2(Unemployment rate - natural unemployment)

So, when natural unemployment is constant, a 3% point change in unemployment rate means output gap will change by 2* 3% = 6%.

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