• 100% Satisfaction Guarantee

Chris M., M.S.W. Social Work
Category: Homework
Satisfied Customers: 2762
Experience:  Master's Degree, strong math and writing skills, experience in one-on-one tutoring (college English)
22285537
Chris M. is online now

# Use Okun's law to determine the size of the GDP gap

### Resolved Question:

Assume the following data for a country: total population, 500; population under 16 years of age or institutionalized, 120; not in labor force, 150; unemployed, 23; part-time workers looking for full-time jobs, 10. What is the size of the labor force? What is the official unemployment rate?
3. Suppose that the natural rate of unemployment in a particular year is 5 percent and the actual rate of unemployment is 9 percent. Use Okun's law to determine the size of the GDP gap in percentage-point terms. If the potential GDP is \$500 billion in that year, how much output is being forgone because of cyclical unemployment?
4. If the CPI was 110 last year and is 121 this year, what is this year's rate of inflation? In contrast, suppose that the CPI was 110 last year and is 108 this year. What is this year's rate of inflation? What term do economists use to describe this second outcome?
6. If your nominal income rose by 5.3 percent and the price level rose by 3.8 percent in some year, by what percentage would your real income (approximately) increase? If your nominal income rose by 2.8 percent and your real income rose by 1.1 percent in some year, what must have been the (approximate) rate of inflation?
Submitted: 4 years ago.
Category: Homework
Expert:  Chris M. replied 4 years ago.

Hello, and thanks for your question.

2. Labor force = 500 - (120 + 150) = 230

Official unemployment rate (unemployed / labor force) = (23 / 230) = 10%

3. GDP gap = (9% - 5%) x 2 = 8%

Forgone output estimated at (8% of \$500 billion) = \$40 billion

4. (a) This year's rate of inflation = (121 - 110) / 110 = 10%

(b) This year's rate of inflation = (108 - 110) / 110 = -1.82%

(c) A negative rate of inflation is referred to as "deflation"

6. (a) Real income % increase (approx.) = (5.3% - 3.8%) = 1.5%

(b) Rate of inflation (approx.) = (2.8% - 1.1%) = 1.7%

Hope this helps!

Chris M., M.S.W. Social Work
Category: Homework
Satisfied Customers: 2762
Experience: Master's Degree, strong math and writing skills, experience in one-on-one tutoring (college English)
Customer: replied 4 years ago.

Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 30 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig+ Xn

a. Calculate the equilibrium level of income or real GDP for this economy.

b. What happens to equilibrium Y if Ig changes to 10? What does this outcome reveal about the size of the multiplier?

Expert:  Chris M. replied 4 years ago.
You can view this answer by clicking here to Register or Login and paying \$3.
Chris M., M.S.W. Social Work
Category: Homework
Satisfied Customers: 2762
Experience: Master's Degree, strong math and writing skills, experience in one-on-one tutoring (college English)

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

### What Customers are Saying:

• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
< Previous | Next >
• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
• This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
• Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
• I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin Kernersville, NC
• Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther Woodstock, NY
• Thank you so much for taking your time and knowledge to support my concerns. Not only did you answer my questions, you even took it a step further with replying with more pertinent information I needed to know. Robin Elkton, Maryland
• He answered my question promptly and gave me accurate, detailed information. If all of your experts are half as good, you have a great thing going here. Diane Dallas, TX

• ### LogicPro

#### Satisfied Customers:

4925
Expert in Java C++ C C# VB Javascript Design SQL HTML
< Last | Next >

### LogicPro

#### Satisfied Customers:

4925
Expert in Java C++ C C# VB Javascript Design SQL HTML

### Manal Elkhoshkhany

#### Satisfied Customers:

4538
More than 5000 online tutoring sessions.

### Linda_us

#### Satisfied Customers:

3138
Post Graduate Diploma in Management (MBA)

### Chris M.

#### Satisfied Customers:

2602
Master's Degree, strong math and writing skills, experience in one-on-one tutoring (college English)

### F. Naz

#### Satisfied Customers:

2126
Experience with chartered accountancy

### Bizhelp

#### Satisfied Customers:

1887
Bachelors Degree and CPA with Accounting work experience

### Seanna

#### Satisfied Customers:

1781
3,000+ satisfied customers, all topics, A+ work