OKUN’S LAW

AND
PHILLIP’S CURVE

BY GROUP HEXAGON
 OKUN’S LAW
 Intuition suggests that if output growth is high, unemployment will decrease. This relation was first
examined by U.S. economist Arthur Okun and IS known as Okun’s law

 Okun's law looks at the statistical relationship between a

country's unemployment and economic growth rates.
 We plot the change in the unemployment rate on the vertical axis against the rate of growth of output
on the horizontal axis .
 There is a tight relation between the two variables:
Higher output growth
leads to a decrease in unemployment.
OKUN’S LAW FOR USA
OKUN’S LAW FOR INDIA
OKUN’S LAW FOR WORLD
ECONOMY
 PHILLIPS CURVE

Intuitively, when unemployment becomes

very low, the economy is likely to overheat,
and this will lead to upward pressure on
inflation. To a large extent, this is true. This
relation was first explored in 1958 by a New
Zealand economist, A. W. Phillips, and has
become known as the Phillips curve. Phillips
plotted the rate of inflation against the
unemployment rate. While plotting the
Phillips Curve we take the unemployment in
the horizontal axis and the inflation rate in
the vertical axis. A low unemployment rate
leads to an increase in the inflation rate, a
high unemployment rate leads to a
decrease in the inflation rate.
PHILLIPS CURVE FOR WORLD
PHILLIPS CURVE FOR USA (1991-2019)
PHILLIPS CURVE
4.00

3.50

3.00

2.50
INFLATION

2.00
(%)

1.50

1.00

0.50

0.00
0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00

UNEMPLOYMENT(%)
 PHILLIP’S CURVE: INDIA(1991-
2020) 16
INDIA : PHILIP'S CURVE

14

12

10
INFLATION RATE

0
5 5.5 6 6.5 7 7.5

UNEMPLOYMENT RATE
THANK YOU