Okun's Law and Phillips Curve

Okun's Law and Phillips Curve Student's Name Institutional Affiliation

Okun's Law and Phillips Curve 1. Discuss and explain Okun's Law. Arthur Okun was a economics professor at Yale University, and he discovered the statistical relationship between a country's rate of economic growth and the unemployment rate in the 1960s, which is called Okun's law. The law explains how much of a gross domestic product (GDP) of a specific country should be lost when unemployment is over the natural rate. The logic behind this concept is that output depends on input and labor in the production. Initially, Okun stated that the unemployment rate decreased by 1% for every 3% decrease in the GDP. After refining the concept, Okun concluded that a country's GDP should grow at approximately 4% for a year for the unemployment rate to decrease by 1% (Dankumo, Ishak, Zubair, & Onisanwa, 2020). Overall, Okun's law clarifies that for a country to reduce its unemployment rate, economic growth must be substantial. 2. Discuss and explain the Phillips curve. William Phillips intr...