Okun's law states that the gap between output and? full-employment output increases by? 2% for each? 1% that the unemployment rate increases.
Why does a? 1% increase in employment lead to twice as large an effect on? output?
A. With fewer? workers, the marginal productivity of labor is? lower, and thus output is lower.
B. When cyclical unemployment is? rising, other factors such as the labor force and worker hours tend to be? falling, further reducing output.
C. According to? Okun's law, every worker produces two units of output.
D. If firms are employing fewer? workers, they must also be choosing to produce lower output due to recession and a falling price level.