The idea that the natural rate of unemployment is increased following extended periods of unemployment is called:
A) Okun's law.
B) the cold-turkey approach.
C) the natural-rate hypothesis.
D) hysteresis.

Question

Quizplus · Accepted Answer

The idea that extended periods of unemployment can increase the natural rate of unemployment is known as hysteresis. Okun's law relates to the relationship between unemployment and GDP, while the cold-turkey approach refers to an abrupt, drastic policy change. The natural-rate hypothesis states that there is a long-term equilibrium in the labor market.

The Idea That the Natural Rate of Unemployment Is Increased