According to Okun's Law, when cyclical unemployment increases from 2 to 3 percent, the recessionary gap increases from ______ percent.

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Quizplus · Accepted Answer

According to Okun's Law, for every 1 percent increase in cyclical unemployment, there is a 2 percent increase in the recessionary gap. So, when cyclical unemployment increases from 2 to 3 percent, there is a 2 percent x 1 percent = 2 percent increase in the recessionary gap. Therefore, the recessionary gap increases from -4 to -6 percent.

According to Okun's Law, When Cyclical Unemployment Increases from 2