Defining u as the unemployment rate and $\bar { u }$ as the natural rate of unemployment, we can write Okun's law as the following equation:
A) $\tilde { Y } = - 2 \times u$
B) $\tilde { Y } = - 2 \times ( u \times \bar { u } )$
C) $\tilde { Y } = 2 \times ( u - \bar { u } )$
D) $\tilde { Y } = - 2 \times ( \bar { u } \times u )$
E) $\tilde { Y } = - 2 \times ( u - \bar { u } )$

Question

Quizplus · Accepted Answer

Okun's law states that for every 1% increase in the unemployment rate above the natural rate, a country's GDP will be roughly an additional 2% lower than its potential GDP. Hence, the correct equation is $\tilde { Y } = - 2 \times ( u - \bar { u } )$.

Defining U as the Unemployment Rate And uˉ\bar { u }uˉ

Defining U as the Unemployment Rate And $\bar { u }$