49. According to Okun's Law each extra percentage point of ___ unemployment is associated with a ____ percenta

Question

49. According to Okun's Law each extra percentage point of ___ unemployment is associated with a ____ percentage point increase in the output gap, measured in relation to potential output.

A. frictional; 2

B. frictional; 4

C. cyclical; 2

D. cyclical; 4

E. structural; 4

50. If firms maintain preset prices in the short run, then the primary cause of outputs gaps is changes in:

A. potential output.

B. prices.

C. capital and technology.

D. economywide spending.

E. labor mobility.

Answer 1

C. cyclical; 2

D. economywide spending.

Answer 2

49. According to Okun's Law each extra percentage point of ___ unemployment is associated with a ____ percentage point increase in the output gap, measured in relation to potential output.

correct answer:

C. cyclical; 2

50. If firms maintain preset prices in the short run, then the primary cause of outputs gaps is changes in:

correct answer-

D. economywide spending.

note:

In the United States during the period since 1965, Okun's law can be stated as saying that for every one percentage point by which the actual unemployment rate exceeds the so-called "natural" rate of unemployment, real gross domestic product is reduced by 2% to 3%. That is, unemployment above the inflation-threshold unemployment rate reduces GDP below potential output, and for every 1% excess of the natural unemployment rate, a 2% to 3% reduction in GDP is predicted. The difference between actual and potential GDP is called the GDP gap. It may be expressed as a percentage or an absolute amount.