According to Okun's law,
A) when real GDP is above potential output, unemployment will be relatively low.
B) when real GDP is above potential output, unemployment will be relatively high.
C) when the inflation rate is above the natural inflation rate, unemployment will be relatively low.
D) when the inflation rate is above the natural inflation rate, unemployment will be relatively high.

Question

Quizplus · Accepted Answer

Okun's law posits a negative relationship between changes in the unemployment rate and the growth rate of real GDP. Therefore, when real GDP is above potential output, it implies the economy is growing faster than its long-term sustainable rate, leading to lower unemployment as more workers are needed to meet the increased demand for goods and services.

According to Okun's Law