Cyclical unemployment:
A) causes unemployment statistics to be understated.
B) causes unemployment statistics to be overstated.
C) occurs because of recessions.
D) occurs because of technological innovations in production.

Question

Quizplus · Accepted Answer

Cyclical unemployment is associated with the business cycle and occurs during recessions when aggregate demand falls. It results from an overall decline in economic activity, which leads to firms reducing their production and laying off workers to control costs. The decrease in demand for labor leads to higher unemployment rates, and thus this causes unemployment statistics to be overstated.

Cyclical Unemployment