PRC-3 · Chapter 18 · Question 15 of 33
The global economy enters a severe recession. Consumers stop buying cars, leading automobile manufacturers to lay off 20% of their assembly line workforce due to a lack of aggregate demand. This is an example of:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Cyclical unemployment
Explanation
Cyclical unemployment (demand-deficient unemployment) is caused directly by a downturn in the business cycle when aggregate demand is too low to support full employment.
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