The idea that hysteresis plays a role in macroeconomics implies that
A)monetary policy can have an effect on the natural rate of unemployment.
B)workers can overreact to changes in monetary policy.
C)stabilization policy is ineffective and counterproductive.
D)fiscal policy is ineffective and counterproductive.

Question

Quizplus · Accepted Answer

Hysteresis in macroeconomics suggests that there can be long-lasting effects on the economy from temporary shocks or fluctuations. This can mean that changes in monetary policy can have a lasting impact on the natural rate of unemployment, implying that choice A is the best option. Options B, C, and D are not necessarily true as hysteresis does not imply these conclusions.

The Idea That Hysteresis Plays a Role in Macroeconomics Implies