According to Okun's law, when cyclical unemployment increases from 1 percent to 2 percent, the recessionary gap increases from ________.
A)−2 percent to −4 percent
B)−1 percent to −2 percent
C)2 percent to 4 percent
D)1 percent to 2 percent

Question

Quizplus · Accepted Answer

According to Okun's law, each extra percentage point of cyclical unemployment is associated with about a 2 percent widening of a negative output gap. In this case, the original recessionary gap must have been −2 percent. When cyclical unemployment rises 1 percent, the recessionary gap widens by 2 percent to −4 percent.

According to Okun's Law, When Cyclical Unemployment Increases from 1