ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the growth in real GDP is high.
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the growth in real GDP is low.
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inflation is also relatively high.
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the amount of physical capital available has decreased.
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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: -In general accepted theory, when the growth rate of a country’s economy increases, it is expected that employment will increase and the unemployment rate will decrease.
Detailed explanation-4: -The economy is considered to be at full employment when the actual unemployment rate is equal to the natural rate. When the economy is at full employment, real GDP is equal to potential real GDP.