1.20. If employment coefficient is positive and smaller than 1; then
[1] There is economic growth
[2] There is an increase in employment opportunities
[3] A 1% economic or real GDP growth rate will result in a more than 1% increase in employment
[4] There is an increase in potential GDP
[5] The 1% economic growth rate will result in a less than 1% increase in employment
The percentage increase by which GNP changes when unemployment falls by 1% is the Okun coefficient.
The relationship between unemployment and GNP or GDP varies by country. In the United States, the Okun coefficient estimates that when unemployment falls by 1%, GNP will rise by 3% and GDP will rise by 2%. When unemployment rises by 1%, then GNP is expected to fall by 3% and GDP is expected to fall by 2%.
So, the correct answer is [5].
Comments
Leave a comment