Which of the following is a characteristic of the 'Search Theory' of unemployment?
A. Only aggregate demand determines unemployment
B. Unemployment arises from the time-consuming process of matching workers and jobs
C. Markets always clear instantaneously
D. Unemployment is only classical and caused by high real wages
Answer: Option B
Solution (By JKSSB Mock Tests)
Search-and-matching theory explains frictional and structural unemployment as the result of imperfect information and the costly process of matching heterogeneous workers with heterogeneous jobs.
Explanation:
While unemployment can be voluntary or involuntary, the standard cause-based classification includes frictional, structural, cyclical and seasonal unemployment.
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