What is the relationship between inflation unemployment and Real GDP?

Answer 1

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.

Answer 2

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.

Answer 3

if you have a 1 % increase in unemployment then you have a 2% lose in GDP.

Answer 4

Its Unemployment-Apeex

Answer 5

it is a simple

Answer 6

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