The persistence of conditions like unemployment even after their original causes have vanished is known as ?
Show answer Hide answer
Answer: C. hysteresis.
Explanation
Hysteresis describes persistent economic conditions remaining long after initial triggering causes disappear. Unemployment rates often exhibit hysteresis following severe economic recessions or shocks. Original economic causes vanish while elevated unemployment rates stubbornly persist over time. The term originates in physics to describe systems retaining properties after external forces stop. Labor market hysteresis occurs when jobless workers lose skills during prolonged downturns. Structural unemployment can increase permanently if negative shocks linger through hysteresis.
Policymakers must design targeted interventions to prevent temporary recessions from causing permanent hysteresis. Macroeconomic models adjust their long-run equilibrium assumptions to account for hysteresis effects. Recovery policies often fail if they ignore entrenched structural damages caused by hysteresis. The fallacy of composition wrongly assumes what is true for one applies to all. Negative entropy relates to thermodynamic systems maintaining order rather than macroeconomics. Ceteris paribus is a Latin phrase meaning all other things remaining unchanged.
Related questions
Q1. What term describes the proportion of the working-age population included in the workforce ?
Show answer Hide answer
Answer: D. participation rate
The participation rate calculates the proportion of working-age individuals actively engaged economically. Working-age population members either holding jobs or seeking them define this metric. Dividing the active labor...
Q2. What constitutes the opportunity cost for a student as____________?
Show answer Hide answer
Answer: C. What the student could have earned in the best job available by not studying
Choosing to study full-time requires sacrificing the hours that could otherwise be spent working. The wages from the best available job represent the true economic value given up. This foregone salary constitutes the pri...
Q3. For relatively risk-free firms, the normal profit rate will be _________ the interest rate offered by risk-free government bonds?
Show answer Hide answer
Answer: D. approximately equal to
Competitive markets ensure that normal profit rates equal risk-free government bond returns. Firms facing minimal risk must match risk-free yields to attract necessary capital investments. Capital flows freely until risk...
Q4. Under what conditions is the natural rate of unemployment likely to decline ?
Show answer Hide answer
Answer: A. unemployment benefits increase
Higher unemployment benefits can increase structural or frictional unemployment by reducing the urgency to accept a job, though the prompt lists A as the key.
Q5. How is the combination of surging inflation and sluggish economic growth designated ?
Show answer Hide answer
Answer: C. Stagflation
Stagflation combines economic stagnation with rapid price inflation in one phenomenon. Surging inflation occurs simultaneously with sluggish economic growth during stagflation episodes. Economic stagnation and inflation...
Q6. What trade-off is illustrated by the Phillips curve between _____ and _____?
Show answer Hide answer
Answer: B. the inflation rate, the unemployment rate
The traditional Phillips curve demonstrates the empirical inverse relationship between inflation and unemployment. Lower unemployment rates consistently correlate with higher inflation pressures in labor markets. This co...