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According to Okun's law, if the unemployment rate goes from 6% to 2%. what will be the effect on the GDP?

 

A. It will decrease by 11%

 

B. It will increase by 5%

 

C. It will increase by 11%

 

D. it will decrease by 5%

 Feb 19, 2019
 #1
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+1

Never heard of this but....the law says that : In the short run, the unemployment rate decreases about 1 percentage point for every 3 percent increase in real GDP

 

So....it seems that if the unemployment rate decreases by 4 %.....then the GDP should rise by 4(3%) = 12%

 

So....I suppose  that "C"  comes closest

 

 

cool cool cool

 Feb 19, 2019

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