eco question (1 Viewer)

[zb123]

If growth in year 1 is 2%, and then growth in year 2 is 1%, will this increase cyclical unemployment? I know that 1% still implies an increase in real GDP, but growth is slowing down, so is it considered a downturn???

 

[deswa1]

Yeah that would lead to an increase in unemployment (probably). I would also say that 2% would also lead to an increase in unemployment (defs in Australia). Its not just the CHANGE in economic growth that leads to cyclical unemployment but also the ACTUAL rate of growth.

A general guide in Australia is that growth below 3% will lead to an increase in unemployment (this can be derived from Okuns law and Australian experience)

 

[zb123]

No , theoretically, if this was a multi-choice question, and say real gdp growth was 3% year 1, and then year 2 2.5%, is that a downturn? and would that mean an increase in cyclical u/e? or is a downturn -2%???