Okun's law

Meaning

Proper Noun

• An empirically observed relationship between unemployment and losses in a country's production. The "gap version" states that for every 1% increase in the unemployment rate, a country's GDP will be roughly an additional 2% lower than its potential GDP. The "difference version" describes the relationship between quarterly changes in unemployment and quarterly changes in real GDP.

Origin

• Named after Arthur Melvin Okun, who proposed the relationship in 1962.