The US unemployment rate (actual unemployment, u) is 8.4
percent, while the natural rate of unemployment (nru) is 4.4
percent.
(i) Using Okun's Law, compute the US current percentage GDP gap.
Show your computation. (ii) State your answer in words, comparing
actual to potential output. (iii) Is the US GDP gap positive or
negative—and why?
Note: "Okun’s Law Arthur Okun was the first macroeconomist to
quantify the inverse relationship between the actual unemployment
rate and the GDP gap. He noticed...