Gce Model Questions Vol1 2025 Economics Question 49

Practice objective / multiple choice question 49 from the 2025 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2025 Economics Objective / Multiple Choice Medium Difficulty
Question 49 GCE_MODEL_QUESTIONS_VOL1 • 2025 • ECONOMICS • objective

Okun's law for Country Z states that a 1 % increase in the unemployment rate above the natural rate is associated with a 2 % fall in real GDP relative to its potential level. The actual unemployment rate is 8 % while the natural rate is 5 %. Potential real GDP is ₦5 000 billion. Using Okun's law, calculate (a) the output gap as a percentage of potential GDP, (b) the actual real GDP, and (c) the amount by which real GDP must increase to close the gap. Give your answers to the nearest billion naira.

Answer Options

A. Output gap = 6 %, Actual GDP = ₦4 600 billion, Required increase = ₦400 billion
Correct Answer B. Output gap = 6 %, Actual GDP = ₦4 700 billion, Required increase = ₦300 billion
C. Output gap = 4 %, Actual GDP = ₦4 800 billion, Required increase = ₦200 billion
D. Output gap = 8 %, Actual GDP = ₦4 600 billion, Required increase = ₦400 billion
Correct Answer
B
Correct Option:
Output gap = 6 %, Actual GDP = ₦4 700 billion, Required increase = ₦300 billion

About This Question

This is Gce Model Questions Vol1 2025 Economics Question 49. It is one of the objective questions from the 2025 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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