The history behind the law is an economist person by the name Arthur Okuns which researched the connections between unemployment and standard information in the past 50 years. He figured out equation which includes the percentage change in real GDP also known as Gross Domestic Product that changes the unemployment rate. For an example, the percent change in real GDP= 4% -2x (which is the change in unemployment rate. Which you will end up for your example 4-2*(-2) =8% of real GDP. The example really means that four percent per year when unemployment is a natural rate. For every point above a natural rate that unemployment increases, GDP growth decreases by two percent which gives you the real …show more content…
The unemployment rate of an economy can force a family lower their standard of living and do so much as determine the economic wealth. In an economy, when the unemployment rate starts to rise to high more and more people start to lose their jobs, consumers start to lose their spending confidence which causes businesses to lose money ultimately damaging the country’s economic prosperity. But in terms of macroeconomics, unemployment can be useful. Economist Arthur Okun figured out an equation using the unemployment rate to calculate GDP. Not all unemployment is detrimental; in certain cases unemployment can be normal and necessary part of macroeconomics. There are a lot of real life situations where people become unemployed, willingly or unwillingly, but then start to search vigorously for equal or better employment. Another source of unemployment is college students. Although they aren’t a productive part of the economy, they’re in school to one day become productive citizens. Unemployment can be very hazardous to a countries economy, but once you examine all aspects and factors of unemployment you can conclude that it is normal and in some cases