okuns law:output growth and changes in unemployment e There are two reasons why e 1. Firm adjust employment less than one for one in response to deviations of output growth from the normal growth rate More specifically, output growth that is 1% above normal for one year leads to only a 0.6% increase in the employment rate 2. An increase in the employment rate does not lead to a one for one decrease in the unemployment rate. More specifically, a 0.6%increase in the employment rate leads to only a0.4% decrease in the unemployment rate To continue 2003-7-28 52003-7-28 5 Okun’s law:output growth and changes in unemployment There are two reasons why: ⚫ 1.Firm adjust employment less than one for one in response to deviations of output growth from the normal growth rate. More specifically, output growth that is 1% above normal for one year leads to only a 0.6% increase in the employment rate. ⚫ 2.An increase in the employment rate does not lead to a one for one decrease in the unemployment rate. More specifically, a 0.6% increase in the employment rate leads to only a 0.4% decrease in the unemployment rate. To continue