Question 12 The type of unemployment caused by changes in the business cycle is (1) structural unemployment. (2) cyclical unemployment. (3) natural unemployment. (4) frictional unemployment.

Cyclical unemployment occurs when there is not enough demand in the economy to employ everyone who wants to work, often leading to layoffs during economic downturns. When the economy enters a recession, businesses may cut back on production, resulting in job losses that fluctuate with the economic cycle, hence the name! Understanding cyclical unemployment is crucial for developing policies aimed at combating economic downturns. For example, during a recession, governments might implement stimulus packages or monetary policy adjustments to boost demand. By doing so, they can help to reduce unemployment and stabilize the economy, leading to more job opportunities as the cycle improves.