The Following Information Is for a Specific Year in a Hypothetical

question 112

Multiple Choice

The following information is for a specific year in a hypothetical economy for which Okun's law is applicable:
Potential Real GDP = $200 billion
Natural rate of unemployment = 6 percent
Actual rate of unemployment = 12 percent
-The size of the GDP gap in percentage terms for the above economy is:

• A) 9 percent.
• B) 12 percent.
• C) 15 percent.
• D) 18 percent.

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Definitions:

Before-tax

A financial figure or situation measured without considering the effects of taxation.

Excise Tax

A tax levied on specific goods, services, or transactions, often with the aim of reducing their consumption or generating revenue for the government.

Demand Curve

Demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period, typically showing an inverse relationship.

Supply Curve

A graphical representation depicting the relationship between the price of a good or service and the quantity of that good or service that suppliers are willing to offer for sale at that price.