Question

According to Okun's law, when cyclical unemployment increases by one percentage point, the recessionary gap ______ by ______ percent of potential output.

Answer 1

Answer:

The answer is "widens and  two"

Explanation:

Okun 's law relates to the relationship between some of the unemployment rate and the United States economy and also its gross national product. This also tells that GNP increases by 3% unless joblessness starts dropping by 1%.

The maths formula of this law can be defined as follows:

$2(\text{unemployment rate - natural unemployment}) =$  $\frac{\text{potential GDP-actual GDP}}{\text{potential GDP}} \times 100$

The above formula proves that Whenever a 1% point of cyclical increasing unemployment, its derivative instrument tends to increase by 2%