According to Okun's law,if output grew 7% and full-employment output rose 5%,what would be the change in the unemployment rate?
A)-4%
B)-1%
C)1%
D)4%

Question

Quizplus · Accepted Answer

Okun's law states that for every 1% increase in output above the full-employment level, the unemployment rate falls by 0.5%. Therefore, in this case, the output is 2% above the full-employment output (7%-5%=2%). So, the unemployment rate will decrease by 1% (0.5% x 2 = 1%). Hence, the correct answer is B) -1%.

According to Okun's Law,if Output Grew 7% and Full-Employment Output