Question

there is a mismatch between GDP growth and employment growth in India how do you justify this statement​

Answer 1

Answer:

Different factors affect gross domestic product (GDP) and unemployment. However, historically, a 1 percent decrease in GDP has been associated with a slightly less than 2-percentage-point increase in the unemployment rate. This relationship is usually referred to as Okun's law.1 The first chart plots this relationship for 1949-2011 (open circles). The law, however, seems to have changed during the Great Recession.

During the recent recession, the observed decrease in GDP corresponded to a higher increase in the unemployment rate than Okun's law would predict. In 2009:Q4, with only a 0.5 percent decrease in GDP, the unemployment rate rose by 3 percentage points relative to 2008:Q4. According to Okun's law, however, that 0.5 decrease in GDP should have instead corresponded to a 1.5-percentage-point increase in the unemployment rate. This pattern is reversed in 2011:Q4: A modest increase in GDP was accompanied by a decrease in unemployment significantly larger than what the pre-Great Recession relationship between the data would have predicted. While GDP grew by only less than 2 percent (green circle), the unemployment rate decreased by 1 percentage point. In contrast, Okun's law would have predicted a 0.5-percentage-point increase in the unemployment rate. The red line in the first chart displays the relationship between 2009:Q4 and 2011:Q4: A 4-percentage-point increase in the unemployment rate corresponds to a roughly 1 percent decrease in output. The most recent trend, thus, is significantly steeper than the one experienced in the past. 2 This finding is important because it indicates that Okun's law was not useful for predicting changes in the unemployment rate either during the recent recession or recovery.

What explains the significant deviation from the historical experience during these two time periods? One hypothesis is that the two periods are interconnected: During the recent recovery, the unemployment rate decreased more than expected given the actual increase in GDP because during the recent recession the unemployment rate increased more than expected given the actual decrease in GDP. This hypothesis implies that deviations from Okun's law were balanced out between the two periods and that the earlier historical data should be usable to perform forecasts going forward.

Our analysis challenges that view. The second chart shows the relationship between the year-to-year percentage-point changes in the unemployment rate and in the employment-to-population ratio. The open circles in both panels show the historical relationship between these two variables from January 1949 to the peak that occurred one month before the start of the Great Recession. The solid circles show the relationship between the data during the recession (left panel) and since the recovery started in July 2009 (right panel). The blue lines represent the historical relationship, while the red lines represent that relationship estimated for the Great Recession (left panel) and recovery (right panel).

The left panel of the second chart shows that the relationship between the increase in the unemployment rate and the decline in the employment-to-population ratio during the recent recession is in line with the historical pattern. Thus, while changes in GDP were not useful for predicting changes in unemployment during the recent recession, changes in the employment-to-population ratio were—unemployment during the Great Recession increased significantly because the ratio decreased proportionally.

Answer 2

different factors affect gross domestic product and employment .

during the recent recession ,the observe decrease in gdp corresponding higher increase in unemployment rate than owk 's predict .

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