Cyclical unemployment exists when
A) frictional and structural unemployment is zero.
B) real GDP is less than potential GDP.
C) real national income exceeds potential income.
D) real GDP exceeds potential GDP.

Question

Quizplus · Accepted Answer

Cyclical unemployment occurs when there is a deficiency of aggregate demand in the economy leading to a situation where real GDP is less than potential GDP. This means that businesses are producing less than their capacity and have to lay off workers, leading to unemployment. This type of unemployment is not related to frictional or structural factors in the labor market.

Cyclical Unemployment Exists When