Question

Okun’s law suggests that:

a. A 1% increase is a positive output gap decreases the unemployment rate by 0.5%
b. A 0.5% increase in a positive output gap increase the employment rate by 1%
c. A 1% increase in a positive output gap increase the employment rate by 0.5%
d. A 0.5 % increase in a positive output gap decreases the unemployment rate by 1%

Answer 1

a. A 1% increase is a positive output gap decreases the unemployment rate by 0.5%

Step-by-step explanation:

Okuns law looked at the relationship between unemployment and output empirically.

It states that that for every 1% increase in the unemployment rate, positive output gap falls by roughly 2%.

I hope my answer helps you.