Answer:
GDP will increase by 6% on decrease of the unemployment rate from 7% to 4%.
We are given that,
The unemployment rate decreases from 7% to 4%.
It is required to find the effect of this
decrease on the GDP.
Since, we know,
If the unemployment rate increases (or decreases) by 1%, then the GDP will decrease (or increase) by 2%.
So, we get,
As the unemployment rate decreases by 3%, GDP will increase by double of 3% i.e. 6%
Hence, the GDP will increase by 6% on decrease of the unemployment rate from 7% to 4%.
If the law is basically if unemployment goes up 1% then the GDP goes down 2%, then the unemployment rate going down 3% means the GDP will go up 6%
