In the short-run macro model,cyclical unemployment
A) will be eliminated once the equilibrium output level is reached
B) is caused by an economic expansion
C) occurs when the economy is overheated
D) is caused by too much spending
E) results from insufficient spending

Question

Quizplus · Accepted Answer

Cyclical unemployment is caused by insufficient spending, as it occurs when there is a decline in aggregate demand and businesses reduce their production and layoff workers. It can be reduced by increasing aggregate demand through fiscal or monetary policy. Choices A, B, C, and D are incorrect as they do not accurately describe the causes or solutions for cyclical unemployment.

In the Short-Run Macro Model,cyclical Unemployment