According to Okun's Law,if the annual growth rate of real GDP is 2.5 percent,the unemployment rate is likely to ________.
A) increase by 0.25 percent
B) decrease by 0.25 percent
C) increase by 0.5 percent
D) decrease by 0.5 percent

Question

Quizplus · Accepted Answer

Okun's Law suggests that for every 1% increase in the unemployment rate, a country's GDP will be roughly an additional 2% lower than its potential GDP. Therefore, if the GDP grows by 2.5%, it implies the unemployment rate is likely to decrease, not increase. The exact percentage can vary, but a decrease of 0.25 percent is a reasonable approximation given the typical ratios used in Okun's Law.

According to Okun's Law,if the Annual Growth Rate of Real