ECO 202 WK 2 case Aggregate demand, supply and fiscal policy Name Course Instructor Date Okun`s law Okun’s law implies that a 1% rise in unemployment rate results in a 2% slow down in the GDP given as 2(unemployment rate- natural employment). The employment rate affects income that is related to the GDP, and a 4% GDP growth would result in unemployment of 2%. Okun’s law represents the changes in the output gap, where the economy produces more than the full employment during periods of boom and vice versa (Kennedy, 2000). The decline of income, employment, and trade in a business cycle A decline in the total output, employment, income as well as trade for six months or more months indicates that the economy is in a recession (Investopedia.com, 2015). The real variables indicate the health of the economy and since there is a contraction from slowdown in the economy. Typically, negative economic growth for two or more consecutive quarters indicates the onset of a recession. The small businesses are less resilient during recessions because they do no