Controversies in the Theory of Employment
Controversies in the Theory of Employment
This chapter outlines controversies in the theory of employment. It focuses on four elements that characterize the approach to examining the debate of distinction between short-run and long-run analyses of unemployment. The first approach explains that unemployment is based on rigidities or imperfections in the operation of the price mechanism, while the second approach implies that unemployment must be expressed in terms of either short-period equilibrium or disequilibrium. The third and fourth approach affirms that rigidities are imposed on a perfectly functioning market mechanism and that the long-run equilibrium for the economy is characterized by long-run normal prices and dual long-run normal outputs.
Keywords: theory of employment, unemployment, price mechanism, short-period equilibrium, disequilibrium, market mechanism, long-run equilibrium
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