Non-market-clearing theories of unemployment emphasize wage stickiness.Wage stickiness provides an important explanation for the existence of ________,which fluctuates inversely with real GDP.

Question

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Cyclical unemployment is the type of unemployment that occurs due to the fluctuations in the business cycle. During economic downturns, firms may not be able to sell all their goods at the given prices, which leads to a decline in the demand for labor, and unemployment rises. Because wages are sticky, they do not adjust downward quickly enough to bring the labor market into equilibrium, resulting in cyclical unemployment.

Non-Market-Clearing Theories of Unemployment Emphasize Wage Stickiness