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19 May, 21:10

A country's current unemployment rate is 11 percent. economists estimate that its natural rate of unemployment is 6 percent. about how large is this economy's negative gdp gap?

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  1. 20 May, 00:35
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    To find the GDP (gross domestic product) gap you will take the actual unemployment rate and subtract it from the natural rate. Next you will multiply that by - 2 to find the economy's negative GDP gap.

    Okun's law states there is a - 2% GDP gap for every - 1% that the natural rate exceeds the current rate.

    Following this equation:

    (actual unemployment rate - natural unemployment rate) (-2) = GDP gap

    (11-6) (-2) = 10%
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