The relationship between changes in the level of real GDP and the unemployment rate is explained by:
A) potential GDP.
B) a recessionary gap.
C) Okun's law.
D) equilibrium real GDP

Question

Quizplus · Accepted Answer

Okun's law describes the relationship between changes in the unemployment rate and the growth rate of real GDP. It 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.

The Relationship Between Changes in the Level of Real GDP