According to Okun's law, if the Federal Reserve wants to increase unemployment, it should ________ interest rates, which would ________ output.
A) increase; increase
B) increase; reduce
C) reduce; reduce
D) reduce; not change
E) not change; increase

Question

Quizplus · Accepted Answer

Okun's law suggests an inverse relationship between unemployment and GDP, meaning that actions which reduce output (GDP) tend to increase unemployment. Increasing interest rates typically reduces investment and spending, leading to a reduction in output.

According to Okun's Law, If the Federal Reserve Wants to Increase