Question

cyclical unemployment refers toa. short-run fluctuations around the natural rate of unemployment.b. changes in unemployment due to changes in the natural rate of unemployment.c. the portion of unemployment created by job search.

Answer 1

Cyclical unemployment refers to short-run fluctuations around the natural rate of unemployment.

Cyclical unemployment is the portion of overall unemployment that is a direct outcome of economic boom and bust cycles. Generally speaking, unemployment increases during recessions and decreases during economic expansions. The purpose of the different policy instruments used by governments to boost the economy and a major motivator for studying economics is to reduce cyclical unemployment during recessions.

In the context of the business cycle, cyclical unemployment is related to the erratic ups and downs, or cyclical trends in growth and production, as indicated by the GDP. The downturn usually turns into an upturn, followed by another downturn in most business cycles.

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