Question

In the last quarter of 2019, US GDP was approximately $21.0 trillion dollars with an unemployment rate less than 4%. However, with the precautionary steps taken to stop the spread of COVID-19, a significant number of workers were laid off and unemployment climbed significantly. If the unemployment rate does not decline and stays at an average of 15% for an entire year, then the fall in the US GDP is likely to be

Group of answer choices

$3.15 trillion.

$16.4 trillion.

$4.20 trillion.

$4.60 trillion.

Answer 1

The Gross Domestic Product, is the final value of all goods and services produced in a country or the total income which is generated via the income approach of estimation of the same.

Due to the Corona Virus, the unemployment rates have risen significantly, which has a large impact on the net income of the working class as well as profits for business owners running dry. Any amount of reduction in the workforce has a large impact on the overall income and the gross domestic product for the country declines.

Now, when we assume that the US GDP is 21 Trillion Dollars in valuation and a decline is constantly averaged at 15% per year. the calculation by the amount that GDP went downwards, is possible by multiplying 15% with the 21 Trillion Dollars.

This gives us the following value

Decline in GDP=Unemployment * Value of Gross Domestic Product

In this case, it would be 15%* 21 Trillion USD or 21 Trillion USD*0.15

Which would be equal to 3.15 Trillion US Dollars.

Thus, as per our calculation estimates, Option A is the correct answer to the question.

Please feel free to ask your doubts in the comments section.