PRC-3 · Chapter 18 · Question 6 of 33
The economy crashes into a severe recession, consumer spending plummets, and automobile factories lay off thousands of assembly line workers because no one is buying cars. What kind of unemployment is this?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Cyclical unemployment
Explanation
Cyclical (or demand-deficient) unemployment is caused directly by a downturn in the business cycle and a general lack of aggregate demand in the economy.
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