2433 of are peoplo who do not have jobs but are actively lo

%, 24.33 of are peoplo who do not have jobs but are actively looking for work. The

Solution

Ans.

(a) Number of employed people = 130 million

Number of unemployed = 10 million

Total labour force = 130+ 10 = 140 million

Unemployment rate = number of unemloyed persons / total labour force

Unemployment rate of country = 10 million / 140 million = 7.14%

(b) Now,

Natural rate of unemployment = 6.64%

Output gap = Y - Yn

Output gap is the difference between actual gdp and potential gdp. Okun\'s law suggests a GDP gap or output gap of -2% for every 1% that the unemployment rate exceeds its natural rate. Natural rate of unemployment is 6.64% and unempoyment rate of country calculated above is 7.14%.

So GDP gap is

( 7.14 - 6.64) * -2 = -1.5% = - 0.015 million