The Version of Okun's Law Studied in Chapter 10 Assumes

question 56

Multiple Choice

The version of Okun's law studied in Chapter 10 assumes that when real GDP grows at 2.88 percent over a year, the unemployment rate does not change. If real GDP instead grows at 1.88 percent over a year, Okun's law predicts that unemployment would:

• A)increase by 0.33 percent.
• B)decrease by 0.33 percent.
• C)decrease by 3 percent.
• D)increase by 3 percent.

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Definitions:

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a specified period, including interest, dividends, and capital gains.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.

Holding-Period Return

The total return received from holding an asset or portfolio over a period of time, considering all sources of income and capital gains.

Capital Gains Yield

The price appreciation component of the total return on an investment, calculated as the rise in the investment's price divided by its initial price.