The proposition that each extra percentage point of cyclical unemployment is associated with about a 2 percentage point increase in the output gap, measured in relation to potential output, is known as:

Question

Quizplus · Accepted Answer

This is known as Okun's law, named after American economist Arthur Okun. It states that for each percentage point of cyclical unemployment above the natural rate of unemployment, there will be a 2% decrease in actual output below potential output.

The Proposition That Each Extra Percentage Point of Cyclical Unemployment