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28 Sep 2019
The answer is:
Okun's law refers to the negative relationship that exists between unemployment and real GDP. Okun's law can be summarized by the equation: in real GDP = 3% - 2 x [% in unemployment rate]. That is output moves in the opposite direction from unemployment, with a ratio of 2 to 1. In the short-run, when Y falls 5 percent, unemployment increases 2-1/2 percent. In the long-run, both output and unemployment return to their natural rate levels. Thus, there is no long-run change in unemployment.
I don't get it. Please help, thanks.
The answer is:
Okun's law refers to the negative relationship that exists between unemployment and real GDP. Okun's law can be summarized by the equation: in real GDP = 3% - 2 x [% in unemployment rate]. That is output moves in the opposite direction from unemployment, with a ratio of 2 to 1. In the short-run, when Y falls 5 percent, unemployment increases 2-1/2 percent. In the long-run, both output and unemployment return to their natural rate levels. Thus, there is no long-run change in unemployment.
I don't get it. Please help, thanks.
Joshua StredderLv10
28 Sep 2019