Suppose that the level of frictional unemployment is 2 percent, the level of str

Question

Suppose that the level of frictional unemployment is 2 percent, the level of structural unemployment is 3 percent, and the level of cyclical unemployment is 3 percent. Using Okun's Law, we can determine that real GDP in this economy is

A. 1.5 percent below the long-run trend level of real GDP.

B. 6 percent below the long-run trend level of real GDP.

C. 1.5 percent above the long-run trend level of real GDP.

D. 6 percent above the long-run trend level of real GDP.

A. 1.5 percent below the long-run trend level of real GDP.

B. 6 percent below the long-run trend level of real GDP.

C. 1.5 percent above the long-run trend level of real GDP.

D. 6 percent above the long-run trend level of real GDP.

Explanation / Answer

B. 6 percent below the long-run trend level of real GDP.

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