The proposition each extra percentage point of cyclical unemployment is associated with about a 2 percent widening of a negative output gap, measured in relation to potential output, is known as:
A)the recessionary gap.
B)the expansionary gap.
C)the Fisher effect.
D)Okun's law.

Question

Quizplus · Accepted Answer

Okun's law describes the relationship between cyclical unemployment and the output gap: each extra percentage point of cyclical unemployment is associated with about a 2 percent widening of a negative output gap, measured in relation to potential output.

The Proposition Each Extra Percentage Point of Cyclical Unemployment Is