ECONOMICS
BUSINESS CYCLES
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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goes up
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goes down
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it will have no effect
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None of the above
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Detailed explanation-1: -Another version of Okun’s law focuses on a relationship between unemployment and GDP, whereby a percentage increase in unemployment causes a 2% fall in GDP.
Detailed explanation-2: -Proposed by economist Arthur Okun in 1962, it basically states that if GDP grows rapidly the unemployment rate declines, if growth is very low or neg-ative the unemployment rate rises, and if growth equals potential the unemploy-ment rate remains unchanged.
Detailed explanation-3: -GDP increases when a country has a positive trade balance or surplus. However, GDP decreases when a country spends more money importing goods and products than it makes exporting goods and products, which leads to a trade deficit.
Detailed explanation-4: -A recession can be defined as a sustained period of weak or negative growth in real GDP (output) that is accompanied by a significant rise in the unemployment rate. Many other indicators of economic activity are also weak during a recession.