Question

Provide a concise definition of the following concepts. Do not google these terms and copy things you do not understand. If you do I will give you no credit.

1. Okun’s Law

Answer 1

Okun's law shows the relationship between the unemployment rate and the gross national product GNP of an economy.

According to this theory if the rate of unemployment falls my 1%, the GNP rises by 3% (particularly in USA).

Although, there are two conditions to this thoery:-

1) the relationship between the unemployment and GNP (and GDP) varies with the country.

2) for exclusively USA, the unemployment rate should fall only under the bracket of 3%-7.5%.

Also, some of its other forms deals with the relationship between unemployment and GDP And again this relation varies with nation. For USA, 1% increase in unemployment causes, 2% reduction in GDP.