Question : Which among the following types of unemployment is also known as real wage unemployment?
Option 1: Classical
Option 2: Seasonal
Option 3: Structural
Option 4: Frictional
Correct Answer: Classical
Solution : The correct option is Classical.
Classical unemployment, also known as real wage unemployment, occurs when wages are inflexible and set above the equilibrium level. In this situation, the supply of labour exceeds the demand, leading to unemployment. Classical economists argue that interference in free markets, such as minimum wage laws, contributes to this form of unemployment.
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