"For every 1 percent that the actual unemployment rate exceeds the natural rate,the economy's GDP falls 2.5 percent short of its potential." What is this a statement of?

Question

Quizplus · Accepted Answer

This statement is describing Okun's Law, which expresses the relationship between changes in unemployment and changes in real GDP. According to Okun's law, for every 1 percent increase in unemployment above the natural rate, there is a corresponding 2 percent decrease in real GDP. However, the specific numbers in this question (2.5 percent short of potential GDP) suggest a slightly different formulation of the law than the classic Okun's Law formula.

"For Every 1 Percent That the Actual Unemployment Rate Exceeds