The economy in the diagram below begins in long-run equilibrium at E₀. FIGURE 30-2
-Refer to Figure 30-2.Suppose the economy is in a recession at equilibrium E₁ that is very long lasting.As a result,many young workers are unable to enter the labour market for the first time and are unable to gain experience.These workers continue to have higher than average unemployment rates when the recession is over,causing the NAIRU to rise.This is an example of

Question

The economy in the diagram below begins in long-run equilibrium at E₀.

The economy in the diagram below begins in long-run equilibrium at E<sub>0</sub>. FIGURE 30-2 -Refer to Figure 30-2.Suppose the economy is in a recession at equilibrium E<sub>1</sub> that is very long lasting.As a result,many young workers are unable to enter the labour market for the first time and are unable to gain experience.These workers continue to have higher than average unemployment rates when the recession is over,causing the NAIRU to rise.This is an example of A) discrimination. B) hysteresis. C) inflexible labour markets. D) demographic unemployment. E) voluntary unemployment.

FIGURE 30-2
-Refer to Figure 30-2.Suppose the economy is in a recession at equilibrium E₁ that is very long lasting.As a result,many young workers are unable to enter the labour market for the first time and are unable to gain experience.These workers continue to have higher than average unemployment rates when the recession is over,causing the NAIRU to rise.This is an example of

Quizplus · Accepted Answer

Hysteresis refers to a situation where a prolonged recession or economic downturn leads to structural changes in the economy, such as an increase in the natural rate of unemployment (NAIRU), which persist even after the economy has recovered. In this case, the extended recession has had a lasting impact on young workers, who have been unable to enter the labor market and gain experience. As a result, their unemployment rates remain higher than average, causing the NAIRU to rise.

The Economy in the Diagram Below Begins in Long-Run Equilibrium