Okun’s Law
Okun’s Law is an economic theory that states that for every 1% increase in a country’s unemployment rate, there is a corresponding 3% decrease in the country’s Gross Domestic Product (GDP). This law was first proposed by American economist Arthur Okun in 1962 and has since been used to measure the relationship between economic growth and unemployment. The law is used to measure the impact of economic policies on the labor market and to predict the effects of changes in economic policy on the labor market.
History of Okun’s Law
Okun’s Law was first proposed by American economist Arthur Okun in 1962. Okun was a professor at Yale University and served as an economic advisor to President John F. Kennedy. He was the first to propose the idea that there is a relationship between economic growth and unemployment. He argued that when the economy is growing, unemployment tends to decrease, and when the economy is in recession, unemployment tends to increase. Okun’s Law has since been used to measure the relationship between economic growth and unemployment.
Table of Comparisons
| Unemployment Rate | GDP Change |
|---|---|
| 1% | -3% |
| 2% | -6% |
| 3% | -9% |
| 4% | -12% |
| 5% | -15% |
Summary
Okun’s Law is an economic theory that states that for every 1% increase in a country’s unemployment rate, there is a corresponding 3% decrease in the country’s Gross Domestic Product (GDP). This law was first proposed by American economist Arthur Okun in 1962 and has since been used to measure the relationship between economic growth and unemployment. The law is used to measure the impact of economic policies on the labor market and to predict the effects of changes in economic policy on the labor market. For more information about Okun’s Law, you can visit websites such as Investopedia, The Balance, and The Economist.
See Also
- GDP
- Unemployment Rate
- Economic Growth
- Labor Market
- Economic Policy
- Keynesian Economics
- Monetary Policy
- Fiscal Policy
- Supply-Side Economics
- Phillips Curve
