A decrease in aggregate demand and the subsequent cutbacks in production lead to:
A) frictional unemployment.
B) cyclical unemployment.
C) cost-push unemployment.
D) structural unemployment.

Question

Quizplus · Accepted Answer

A decrease in aggregate demand leads to cutbacks in production, which in turn leads to a decrease in demand for labor. This results in cyclical unemployment, which is due to fluctuations in the business cycle.

A Decrease in Aggregate Demand and the Subsequent Cutbacks in Production