Okun's law is an empirically observed relationship between a country's unemployment rate and losses in its economic output, named for the economist Arthur Melvin Okun, who introduced it in 1962. One common formulation, the gap version, holds that for every one percentage point increase in the unemployment rate, a country's gross domestic product falls roughly two percent below its potential level; a second, the difference version, instead relates quarter to quarter changes in unemployment to quarter to quarter changes in real GDP growth. The relationship is not universally accepted among economists, and its stability and practical usefulness across different times and countries has been disputed even as many still treat it as a useful rule of thumb. This description is adapted from Wikipedia contributors under CC BY-SA 4.0; changes were made. https://creativecommons.org/licenses/by-sa/4.0/
Facts
FieldMacroeconomics (labor markets and output) 1 SignificanceThe gap version states that for every 1 percent increase in the unemployment rate, a country's GDP falls roughly 2 percent below potential GDP, though the law's stability and usefulness have been disputed. 1 Connections
Associated With School
Arthur Okun, who formulated the law, worked within the Keynesian tradition relating output gaps to unemployment.
Source Wikipedia
Additional Source Okun's law (Wikipedia)
Sources
1. Okun's law (Wikipedia)
Lead section
The stability and usefulness of the law has been disputed.
- Associated With School: Keynesian Economics
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