If Okun's Law holds true, then a 3% increase in GDP would lead to a ________ percentage point decrease in the unemployment rate.

Question

Quizplus · Accepted Answer

Okun's Law posits a relationship between changes in the unemployment rate and GDP growth, suggesting that for every 1% increase in GDP, the unemployment rate decreases by about 0.5 percentage points. Therefore, a 3% increase in GDP would lead to a 1.5 percentage point decrease in the unemployment rate, but since the options do not include 1.5, the closest correct option given is 1 percentage point, assuming a simplified interpretation of Okun's Law.

If Okun's Law Holds True, Then a 3% Increase in GDP