PRC-3 · Chapter 18 · Question 23 of 33
The global economy crashes into a severe recession. Consumers stop buying cars, forcing automobile factories to lay off 20% of their assembly workforce due to a lack of overall demand. This represents:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Cyclical unemployment
Explanation
Cyclical (or demand-deficient) unemployment is caused directly by a downturn in the business cycle when aggregate demand drops too low to sustain full employment.
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