The Persistence of High Levels of Unemployment, Especially in Parts

question 12

Multiple Choice

The persistence of high levels of unemployment, especially in parts of continental Europe, is explained in part by all of the following, except:

• A) social and labour market policies that alter the costs and benefits of job search.
• B) insider-outsider models of wage setting that keep wages above equilibrium levels.
• C) the loss of human capital experienced by displaced workers.
• D) certain features of the unemployment insurance regimes.
• E) flexibility in the labour market.

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Definitions:

Decision Making

The method of selecting options through recognizing a decision, collecting data, and evaluating different solutions.

Net Benefits

The total positive effects or gains from a decision or action minus any negative effects or costs associated with it.

Prospect Theory

A behavioral economics theory of preferences having three main features: (1) people evaluate options on the basis of whether they generate gains or losses relative to the status quo; (2) gains are subject to diminishing marginal utility, while losses are subject to diminishing marginal disutility; and (3) people are prone to loss aversion.

Salary

A form of payment from an employer to an employee, which may be specified in an employment contract.