Cyclical unemployment rises during economic recessions and falls during economic expansions.

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BlackTom AI · Accepted Answer

Consider the statement about cyclical unemployment in macroeconomics. 
Option A: True. The core idea of cyclical unemployment is that it fluctuates with the business cycle. During recessions, aggregate demand falls, firms cut output and layoffs occur, raising cyclical unemployment. In expansions, demand recovers, production rises and unemployment due to the cycle tends to decrease. This aligns with standard economic theory linking unemployment to the overall health of the economy. 
Option B: False. Saying it does not rise in recessions or does not fall in expansions would ignore the well-documented patterns of the business cycle. If cyclical unemployment didn’t respond to economic conditions, this would contradict the concept that unemployment is influenced by fluctuations in aggregate demand and GDP over time. 
In summary, the statement matches the conventional view that cyclical unemployment moves inversely with the business cycle: up in downturns, down in upswings.

EC301 Principles of Macroeconomics

Cyclical unemployment rises during economic recessions and falls during economic expansions.

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