Consumer price index (cpi)

What relationship should we expect to find between unemployment and real GDP? Because employed workers help to produce goods and services and unemployed workers do not, increases in the unemployment rate should be associated with decreases in real GDP. This negative relationship between unemployment and GDP is called Okun’s law, after Arthur Okun, the economist who first studied it.

• What relationship should we expect to find between unemployment and real GDP? Because employed workers help to produce goods and services and unemployed workers do not, increases in the unemployment rate should be associated with decreases in real GDP. This negative relationship between unemployment and GDP is called Okun’s law, after Arthur Okun, the economist who first studied it.

 “for every 1% fall in unemployment in an economy, the Gross Domestic Product (GDP) will rise by 2% and Gross National Product (GNP) will rise by 3%”. This means that unemployment is inversely proportional to the GDP and GNP of a country.

•  “for every 1% fall in unemployment in an economy, the Gross Domestic Product (GDP) will rise by 2% and Gross National Product (GNP) will rise by 3%”. This means that unemployment is inversely proportional to the GDP and GNP of a country.
• But this theory relates to the USA
• However, according to the researches, an increase of GDP by 2% will not reduce cyclical unemployment by 1%. In other economies GDP must rise by 5-7% in order to reduce unemployment rate by 1%

Economic fluctuations

Economic activity fluctuates over time. That means, while most economies experience growth in the long run, there may be years where this growth slows down or doesn’t happen at all. Although governments try their best to prevent economic downturns, these fluctuations cannot be entirely avoided.

There are three key facts about economic fluctuations that stand out:

• economic fluctuations are irregular and unpredictable;
• most macroeconomic measures fluctuate together;
• as the output falls, unemployment rises.