Question15 Which of the following is an example of cyclical unemployment? A worker loses her job because the economy begins to enter a recession. A worker loses her job because the minimum wage increases substantially. A worker is unemployed because the cost of finding a job in another city is too high. A worker quits her job to find a better job. A worker loses his job because he failed the macro exam. ResetMaximum marks: 1 Flag question undefined

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BlackTom AI · Accepted Answer

First, let's lay out the question and all the answer choices so we can evaluate each scenario carefully.
Question: Which of the following is an example of cyclical unemployment?
Options:
1) A worker loses her job because the economy begins to enter a recession.
2) A worker loses her job because the minimum wage increases substantially.
3) A worker is unemployed because the cost of finding a job in another city is too high.
4) A worker quits her job to find a better job.
5) A worker loses his job because he failed the macro exam.

Now, examining each option one by one:
Option 1: A worker loses her job because the economy begins to enter a recession. This directly ties job loss to a downturn in the overall economy, which reduces aggregate demand and leads to cyclical unemployment. It reflects fluctuations in the business cycle, not a change in the job’s nature or the job seeker’s personal decisions.

Option 2: A worker loses her job because the minimum wage increases substantially. This scenario relates to a policy change that could affect employment, often discussed as a potential cause of structural or wage-floor-related displacement, not the cyclical ups and downs of the economy. The cause is more static and policy-driven rather than cycle-driven.

Option 3: A worker is unemployed because the cost of finding a job in another city is too high. This describes geographic immobility or search frictions, which are components of structural unemployment or unemployment due to relocation costs, not the business cycle. It’s about costs and frictions, not aggregate demand shifts.

Option 4: A worker quits her job to find a better job. This is a voluntary separation or frictional unemployment, arising from individuals actively searching for new opportunities. It is not caused by overall economic downturn or cyclical demand changes.

Option 5: A worker loses his job because he failed the macro exam. This is an explicit personal failure or qualification issue leading to unemployment, which is not related to the cycle-wide fluctuations that define cyclical unemployment.

After weighing each scenario, the one that aligns with cyclical unemployment is the first option, because it ties job loss to a recessionary phase in the economy where aggregate demand falls and unemployment rises broadly across many industries.

Note on misconceptions to avoid: confusing cyclical unemployment with structural or frictional unemployment can lead to incorrect answers. Structural unemployment involves mismatches between skills and job opportunities or long-term industry changes; frictional unemployment involves the normal job-search process. Policy-induced wage changes or location costs would point to non-cyclical forms of unemployment. Personal failure or voluntary quitting are not driven by the economy’s cycle.

In summary, the reasoning centers on whether the unemployment is caused by broad economic downturns (cyclical) versus individual, policy, or friction-based factors (non-cyclical). The scenario that ties unemployment to a recession fits cyclical unemployment most clearly.

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