One aspect of the module focused on Okun's Law, which describes the relationship between Real GDP growth and the change in the unemployment rate and may be approximated as follows:

 

Real GDP Growth = 3 - 2*Change in unemployment rate.

This relationship applies to changes from year to year.

The average unemployment rate in the 12 months of 2021 was 5.4%.

The average unemployment rate during the 12 months of 2022 was 3.6%. What does Okun's Law imply about the rate of Real GDP growth between 2021 and 2022? Explain your answer.

HINT: Remember that a decrease is a negative change. For example, if later value = 2 and earlier value = 3, the change is later value - earlier value = 2 - 3 = -1

How does this prediction compare to the actual rate of Real GDP growth between 2021 and 2022?

Answer rating: 100% (QA)

Okuns Law provides an approximate relationship between the change in the unemployment rate ... View the full answer