Gce Model Questions Vol1 2020 Economics Question 4

Practice objective / multiple choice question 4 from the 2020 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2020 Economics Objective / Multiple Choice Medium Difficulty
Question 4 GCE_MODEL_QUESTIONS_VOL1 • 2020 • ECONOMICS • objective

A country's potential real GDP is \(500\) billion dollars. The actual real GDP is currently \(470\) billion dollars. Okun's law states that a \(1\%\) fall in real GDP relative to potential raises the unemployment rate by \(0.5\) percentage points. The natural rate of unemployment is \(5\%\). What is the current unemployment rate and what proportion of it is cyclical unemployment?

Answer Options

A. 9% (cyclical component 4%, i.e., 44.4% of total)
Correct Answer B. 8% (cyclical component 3%, i.e., 37.5% of total)
C. 7% (cyclical component 2%, i.e., 28.6% of total)
D. 10% (cyclical component 5%, i.e., 50% of total)
Correct Answer
B
Correct Option:
8% (cyclical component 3%, i.e., 37.5% of total)

About This Question

This is Gce Model Questions Vol1 2020 Economics Question 4. It is one of the objective questions from the 2020 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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