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Description
Flashcards by Sophia Lynch, updated more than 1 year ago
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Created by Sophia Lynch
about 6 years ago
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| Question | Answer |
| What is Okun's Law? | Each increase of 1% of CYCLICAL UNEMPLOYMENT is associated with 2% percentage point increase in the OUTPUT GAP, measured in relation to TOTAL OUTPUT. |
| Okun's Law: Formula for Output Gap relative to Y* (potential output) | (Y - Y*) / Y* = -2 (u - u*) |
| Okun's Law: Formula for Output Gap | Y - Y* = -2 (u - u*) Y* |
| Okun's Law: Formula for Actual Output | Y = Y* -2 (u - u*) Y* |
| What does Y, Y*, u & u* stand for? | Y = Output Y* = Potential Output u = Unemployment Rate u* = Natural Rate of Unemployment |
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