What would be the dollar value of the recessionary gap

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Reference no: EM13889181

Back in 2000, the Canadian unemployment rate averaged 6.8 percent and current dollar GDP reached $1056 billion (or $1.056 trillion). Pierre Fortin, a leading Canadian macroeconomist affiliated with the Université du Québec à Montréal, had estimated Canada’s natural rate of unemployment for 2000 as being 5.3 percent. By contrast, one could infer an estimate of a natural rate of unemployment of about 7 percent from official Bank of Canada statements, such as the Bank’s claim that the Canadian economy was operating with an expansionary gap for most of 2000 (when the actual unemployment rate was around 6.8 percent in most months).

Instructions: Round your answer to the whole number.

Using Okun’s law, what would be the potential GDP number for 2000 corresponding to a natural unemployment rate of 5.3 percent?

$ billion.

What would be the dollar value of the recessionary gap?

The recessionary gap would be $ billion.

Also, what would be the potential GDP number corresponding to a natural rate of 7 percent?

The potential GDP number would be $ billion.

What would be the dollar value of the expansionary gap?

The expansionary gap would be $ billion.

Reference no: EM13889181

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