Which of the following pairs of variables are explained by the Okun's law?
A) The money growth rate and the inflation rate.
B) The money growth rate and the change in output growth rate.
C) The inflation rate and the unemployment rate.
D) The growth rate of output and the change in the unemployment rate.
E) The inflation rate and the change in the unemployment rate.

Question

Quizplus · Accepted Answer

Okun's law is a relationship between changes in the unemployment rate and the growth rate of output. It states that for every 1% increase in the unemployment rate, there is a 2% decrease in the growth rate of output. Therefore, only choice D, which includes the growth rate of output and the change in the unemployment rate, can be explained by Okun's law.

Which of the Following Pairs of Variables Are Explained by the Okun's