Unemployment hysteresis refers to the fact that
A. high rates of unemployment tend to perpetuate themselves
B. when unemployed, individuals reduce their consumption, causing firms to lay off more workers and therefore cyclical unemployment increases even more
C. individuals who experience long spells of unemployment often get desperate and take jobs for which they are overqualified
D. politicians often react irrationally to news of high unemployment and stimulate the economy causing unnecessary political cycles
E. none of the above
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Which of the following can affect the frequency of unemployment?
A. the availability of unemployment benefits
B. the variability of the demand for labor across different employers
C. the rate at which new workers enter the labor force
D. both A) and B)
E. both B) and C)
Over the last five decades, the natural rate of unemployment has
A. always been around 4%
B. declined from about 5.5% in the 1950s to about 4% in 2009
C. changed as the composition of the labor force has changed
D. consistently declined as more women entered the labor force
E. increased from 3% in the 1950s to 8% in the 1980s, but decreased ever since
If the government stimulates aggregate demand in response to an adverse supply shock,
A. the inflation rate will increase but frictional unemployment will decrease
B. the unemployment rate will increase but the inflation rate will decline
C. an increase in unemployment can be avoided but only at the cost of increased inflation
D. high inflation can be avoided but the rate of unemployment will increase
E. the inflation and unemployment rates will be reduced simultaneously
Assume the economy is at full employment. If the Fed accommodates an increase in oil prices by expansionary monetary policy, the most likely long-run effect will be that
A. unemployment and prices will both increase
B. unemployment will decrease and prices will remain the same
C. unemployment will increase but prices will remain the same
D. unemployment and prices will both remain unchanged
E. unemployment will remain about the same but prices will increase
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