A Federal Reserve publication remarks: “For Okun’s law to be useful as a rule of thumb, the relationship between real GDP growth and the unemployment rate needs to be stable across time.”
a. What is the relationship between real GDP and unemployment, according to Okun’s law?
b. Has Okun’s law been stable across time? Briefly explain.
c. What does the authors mean by a “rule of thumb”? Is Okun’s law a good rule of thumb?