If the natural unemployment rate is 4 percent and potential GDP ...

[james9437]

If the natural unemployment rate is 4 percent and potential GDP is 30 billion, then according to Okun's Law, when the unemployment rate falls to 3 percent, real GDP
 
  A) decreases to 29.4 billion.
  B) first decreases by 4 percent and then increases by 4 percent.
  C) increases to 60 billion.
  D) increases to 30.6 billion.
  E) remains constant at 30 billion.

Question 2

If the real interest rate falls, other things being the same, the quantity of loanable funds demanded ________ and the quantity of loanable funds supplied ________.
 
  A) does not change; decreases
  B) increases; increases
  C) increases; decreases
  D) decreases; does not change
  E) decreases; decreases

[Ashley I]

Answer to Question 1

D

Answer to Question 2

C