The idea that a 1% increase in the output gap will decrease the unemployment rate by 0.5% is known as _____ law.

Question

Quizplus · Accepted Answer

Okun's law describes the relationship between GDP and unemployment, stating that for every 1% increase in the output gap (the difference between actual and potential GDP), the unemployment rate will decrease by approximately 0.5%. Phillips's law, on the other hand, describes the relationship between inflation and unemployment, stating that there is an inverse relationship between the two. Poloz's and Keynes's laws are not widely recognized economic concepts.

The Idea That a 1% Increase in the Output Gap