Assuming that the growth rate of full-employment output is 3%,and that the actual unemployment rate fell 2 percentage points in the last year,Okun's Law predicts that output growth rate over the past year was
A)-1%
B)3%
C)5%
D)7%

Question

Quizplus · Accepted Answer

Okun's Law suggests that for every 1% decrease in the unemployment rate, GDP grows by about 2%. A 2 percentage point decrease in unemployment implies a 4% increase in output above the normal growth rate. Adding this to the 3% full-employment growth rate gives a total growth rate of 7%.

Assuming That the Growth Rate of Full-Employment Output Is 3%,and