According to Okun's law, if unemployment rises by 5 percent while imports and exports increase at roughly the same rate, the economy will lose output equal to 10 percent.
What is Okun's Law?
- Okun's Law states that there is a causal link between unemployment and output losses in a nation.
- It asserts that a 1% rise in unemployment will typically be accompanied by a 2% decline in GDP (GDP).
- Output and employment are the two main economic parameters that economists focus on while researching the economy.
- Many economists research the connection between output (or more particularly, gross domestic product) and unemployment rates since there is a relationship between these two components of an economy.
The statistical relationship between GDP and unemployment is examined by Okun's Law. Okun's Law can be used to calculate gross domestic product estimates (GNP).
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