Hysteresis occurs when:
A) people get agitated over the level of unemployment.
B) people become easier to employ because of a variety of skilled labour available.
C) the full-employment rate of unemployment increases as the actual unemployment rate increases.
D) unemployment falls quickly after a recession.

Question

Quizplus · Accepted Answer

Hysteresis refers to the idea that long-term unemployment can affect the economy's capacity to produce goods and services, thereby causing the full-employment rate of unemployment to increase as actual unemployment increases. Option A is incorrect because people getting agitated does not necessarily lead to hysteresis. Option B is incorrect because having a skilled labor force does not necessarily indicate hysteresis. Option D is incorrect because falling unemployment after a recession does not necessarily indicate hysteresis.

Hysteresis Occurs When