The concept of 'Hysteresis' in unemployment refers to:
A. The tendency of unemployment to persist even after the original cause has disappeared
B. Temporary unemployment that disappears quickly
C. Only frictional unemployment
D. Only seasonal unemployment
Answer: Option A
Solution (By JKSSB Mock Tests)
Hysteresis in unemployment means that high unemployment can become self-perpetuating through loss of skills, reduced employability or changes in wage-setting behaviour, so that the natural rate itself rises.
Explanation:
New Institutional Economics, associated with Coase, North and Williamson, analyses how institutions, property-rights structures and transaction costs shape economic behaviour and long-run performance.
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