The theory that the unemployment rate decreases about 1% for every 3% increase in real GDP is

Question

Quizplus · Accepted Answer

Okun's law is an empirical relationship between changes in the unemployment rate and changes in real GDP. It states that for every 1% increase in the unemployment rate, there is a 2% decrease in real GDP. Therefore, the inverse should hold as well, with every 1% increase in real GDP leading to a decrease in the unemployment rate. The commonly accepted estimate is that for every 3% increase in real GDP, the unemployment rate decreases by about 1%.

The Theory That the Unemployment Rate Decreases About 1% for Every