For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of
A) Taylor's rule.
B) Okun's law.
C) Say's law.
D) the Coase theorem.

Question

Quizplus · Accepted Answer

This is a statement of Okun's law, which relates changes in GDP with changes in unemployment. According to the law, for every 1 percentage point increase in unemployment above the natural rate, the GDP gap (the difference between actual and potential GDP) increases by 2 percentage points.

For Every 1 Percentage Point That the Actual Unemployment Rate