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The relationship between unemployment and GDP is called Okun's law. It is the association of a higher national economic output with the decrease in national unemployment. This is because in order to increase the economic output of a country, people will need to go back to work, thus lowering unemployment. Empirical studies on the relationship between GDP and unemployment show that for every percentage point fall in the unemployment rate there is an increase in GDP by 2.5 percent. Experts believe that the reason for this large coefficient is because the unemployment rate does not count discourages workers who obtain a job before they are counted in the unemployment numbers. Another reason is when economic output increases firms typically don't hire new workers but have their current workers work for longer hours. Also some industries have increasing returns to scale where increasing the labor force has a multiplicative effect on their output.
During peak periods of the business cycle when the economy is experiencing rapid growth in real GDP, employment will increase, and unemployment decrease, as businesses seek workers to produce a higher output. If real GDP grows too quickly, however, it can cause price inflation as firms are forced to bid against one another for increasingly scarce workers. In contrast during trough periods of the business cycle the economy is experiencing declines in real GDP, and unemployment rates are high.
This is classic Neo-Keynsian economic theory, taught everywhere. Of course there are other schools of ecomonic theory, like Monetorists, Publick Choice, or even the Austrian schools of economic theory. Everyone learns Keynsian, and then maybe learn the other schools.
if you have a 1 % increase in unemployment then you have a 2% lose in GDP.
Its Unemployment-Apeex
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What are the three statistics for measuring macroeconomic health?
real GDP inflation unemployment
Which economic indicator would be most useful of figuring?
Real unemployment, including those that have exhausted benefits, and real inflation, including fuel and food.
What impact will a negative demand shock have on the main measures of economic performance?
REal GDP will increase , inflation will increase, and unemployment will decrease
Inflation is an increase in?
Inflation is an increase in the price level. Arguably, it can be attributed to changes in unemployment and deviations from the natural unemployment rate, since employees demand real wages, so as the price level increases, wages must increase simultaneously or people will quit their jobs, since the benefit of leisure (i.e. not working) out ways the cost (i.e. not earning income). However, this relationship may by a correlation, and causation may not exist. Nonetheless, inflation is a positive change in the price level of all goods. It is a phenomena caused by short run changes in the structure of the economy.
What is the relevance of the Phillips curve to modern economies?
The Phillips curve plots inflation against unemployment and was first published in 1958. It was used in policy making to reduce unemployment by accepting a higher level of inflation. However, as inflation increases workers begin to factor the increase into their wage demands, e.g. if the workers know that inflation is running at 5% and want a 'real' wage increase of 5% they'll ask for 5%+5%=10% wage increase (if they only receive an increase of 5% the real value of their wages will stay the same and if they have no increase the real value will fall by 5%). Because all workers factor in inflation into their wage demands unemplyment returns to its original level while inflation remains high. This realisation was made after the economic woes of the 1970s and 80s where there was significant inflation and unemplyment in many countries - something that had been unpredicted. The relevance of the Phillips curve today serves as a warning that governments cannot trade unemployment for inflation. This is why Central Banks only target inflation and not unemloyment in their monetary policy decisions.
What are the three statistics for measuring macroeconomic health?
real GDP inflation unemployment
Which economic indicator would be most useful of figuring?
Real unemployment, including those that have exhausted benefits, and real inflation, including fuel and food.
Real GDP is not changing at all, unemployment is about 8%, and inflation is steady. Where in the business cycle is the economy?
trough
What impact will a negative demand shock have on the main measures of economic performance?
REal GDP will increase , inflation will increase, and unemployment will decrease
Real GDP is rising at a 5% rate, unemployment is at 6% and falling, and inflation is rising at about 2% per year. Where in the business cycle is the economy?
expansion
Inflation is an increase in?
Inflation is an increase in the price level. Arguably, it can be attributed to changes in unemployment and deviations from the natural unemployment rate, since employees demand real wages, so as the price level increases, wages must increase simultaneously or people will quit their jobs, since the benefit of leisure (i.e. not working) out ways the cost (i.e. not earning income). However, this relationship may by a correlation, and causation may not exist. Nonetheless, inflation is a positive change in the price level of all goods. It is a phenomena caused by short run changes in the structure of the economy.
Is the relationship between Selena Gomez and Justin bieber real?
yes the relationship between Justin and Selena is real!!!!!!
What is the relevance of the Phillips curve to modern economies?
The Phillips curve plots inflation against unemployment and was first published in 1958. It was used in policy making to reduce unemployment by accepting a higher level of inflation. However, as inflation increases workers begin to factor the increase into their wage demands, e.g. if the workers know that inflation is running at 5% and want a 'real' wage increase of 5% they'll ask for 5%+5%=10% wage increase (if they only receive an increase of 5% the real value of their wages will stay the same and if they have no increase the real value will fall by 5%). Because all workers factor in inflation into their wage demands unemplyment returns to its original level while inflation remains high. This realisation was made after the economic woes of the 1970s and 80s where there was significant inflation and unemplyment in many countries - something that had been unpredicted. The relevance of the Phillips curve today serves as a warning that governments cannot trade unemployment for inflation. This is why Central Banks only target inflation and not unemloyment in their monetary policy decisions.
What is the relationship and proportioned powers that exists between the buyer and the supply?
The monetarist explanation of inflation operates through the Quantity Theory of Money, MV = PT where M is Money Supply, V is Velocity of Circulation, P is Price level and T is Transactions or Output. As monetarists assume that V and T are determined, by real variables, there is a direct relationship between the growth of the money supply and inflation. ChaCha again!
What are the effects of inflation on real domestic product?
What are the effects of inflation on real domestic output?
Can TVM be used to evaluate the real return or just the nominal return?
TVM, or Time Value of Money can certainly be used to calculate a real return. The only difference between a nominal return and a real return is inflation, so simply discount your future cash flows by anticipated inflation and you have a real return. In simpler terms assuming inflation is steady you could simply deduct inflation from your nominal return. For example a nominal 7% return with 3% inflation could be desribed as a 4% real return.
Which of the following is characteristic of a "good" economy a. unemployment of about 8% b. inflation of about 5% annually c. real GDP growth of about 4% annually d. tax rates of about 80%?
c. real GDP growth of about 4% annually
