Question

Okun's law Multiple Choice quantifies the relationship between nominal and real incomes. shows the relationship between the unemployment rate and the size of the negative GDP gap. measures the trade-off between the rate of inflation and the rate of unemployment. indicates the number of years it will take for a constant rate of inflation to double the price level.

Answer 1

Answer:

shows the relationship between the unemployment rate and the size of the negative GDP gap.

Explanation:

Okun's law focuses on the relationship that exists between unemployment and economic growth. It's states that the gross domestic product of a nation should grow at about 4% to result in an unemployment rate reduction of 1%.

So it follows that if unemployment rate rises there will be a negative gap in the GDP of a country.

Employed labour is needed to produce output that will grow the economy and the GDP.

However when unemployment increases there is less labour and low output level, resulting in reduction of GDP.