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

question 33

Multiple Choice

The version of Okun's law studied in Chapter 10 assumes that with no change in unemployment, real GDP normally grows by 3 percent over a year. If the unemployment rate fell by 1 percentage point over a year, Okun's law predicts that real GDP would:

• A) decrease by 1 percent.
• B) decrease by 2 percent.
• C) increase by 4 percent.
• D) increase by 5 percent.

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Definitions:

Geometric Average

The average rate of return for a set of values calculated by multiplying them together and then taking the nth root (where n is the total number of values).

Arithmetic Average

A calculated central value of a set of numbers by adding all numbers and dividing by the count of numbers.

Probability Ranges

A statistical measure that estimates the range within which the value of a variable or outcome will fall, given a certain level of confidence.

Normal Distribution

A symmetric, bell-shaped frequency distribution that can be defined by its mean and standard deviation.