Cyclical unemployment
A) is the major part of the natural unemployment rate.
B) rises as a result of increased international competition.
C) decreases during economic expansions.
D) falls when unemployment compensation payments are increased.

Question

Quizplus · Accepted Answer

Cyclical unemployment is the type of unemployment that is caused by a downturn in the business cycle or a recession. It is a result of a decrease in economic activity and often accompanies a contraction in GDP. Therefore, cyclical unemployment decreases during economic expansions when economic activity and GDP increase. Options A, B, and D are incorrect because cyclical unemployment is not a part of the natural unemployment rate, not affected by increased competition or unemployment compensation payments.

Cyclical Unemployment