The cyclical unemployment rate is positive when

Question

Quizplus · Accepted Answer

Cyclical unemployment is the unemployment that occurs when there is a downturn in the business cycle, leading to a decrease in demand for goods and services and a decrease in demand for labor. Therefore, when there is a recessionary gap (the difference between potential output and actual output), the cyclical unemployment rate is positive. Choice B is incorrect because an expansionary gap (the difference between actual output and potential output) would lead to a decrease in cyclical unemployment. Choice C is incorrect because the output gap indicates the difference between actual output and potential output, but does not directly relate to cyclical unemployment. Choice D and E are incorrect because they do not relate to cyclical unemployment specifically.

The Cyclical Unemployment Rate Is Positive When