Okun's Law

In economics, Okun's Law, named after economist Arthur Okun, describes a relationship between the change in the rate of unemployment and the difference between actual and potential real GDP. It is more accurately called "Okun's rule of thumb" since it is an empirical generalization rather than being clearly based on economic theory. The relationship varies depending on the country and time-period under consideration. Okun's "law" is often mentioned in discussions about the NAIRU: unemployment above this inflation-threshold unemployment rate corresponds to real gross domestic product below potential output.