Final answer:
Arthur Okun's Law states a direct relationship between output and employment, but not strictly in a 1:1 proportion; therefore, the statement is false. Okun's Law suggests that a decrease in unemployment rate leads to an increase in real GDP.
Step-by-step explanation:
The belief held by Arthur Okun is that there is a direct relationship between output and employment. This is commonly known as Okun's Law. In basic terms, it posits that when employment rises, output also increases, and vice versa. However, Okun did not necessarily state that this relationship was in a strict proportion of 1:1. Instead, Okun's Law can be more accurately described by stating that for every 1% decrease in the unemployment rate, a corresponding 2-3% increase in real GDP is typically observed. Therefore, the assertion that Okun believed the relationship was a proportion of 1:1 is false.
The theory of production and the Law of Variable Proportion provide a conceptual framework for understanding how changes in the quantity of a single input, like labor, can affect overall output in the production of goods and services. According to the concept of productivity, which is the output per unit of input, we can measure productivity by comparing GDP (output) to the number of workers (input).