Workers at an automobile assembly plant are laid off because the economy is weak and the demand for automobiles has fallen. What type of unemployment best describes the workers' situation?

• A. Structural unemployment
• B. Frictional unemployment
• C. Natural Unemployment
• D. Cyclical Unemployment

Answer: (D)

Verified step by step guidance

1. Understand the different types of unemployment: Structural unemployment occurs when there is a mismatch between the skills of the workers and the skills needed for available jobs. Frictional unemployment happens when workers are temporarily between jobs or are searching for new ones. Natural unemployment is the sum of structural and frictional unemployment and represents the unemployment rate when the economy is at full employment.
2. Recognize that cyclical unemployment is related to the business cycle. It occurs when there is not enough demand for goods and services in the economy, leading to a reduction in production and, consequently, a reduction in the workforce.
3. Identify the key details in the problem: The workers are laid off because the economy is weak and the demand for automobiles has fallen. This indicates that the unemployment is due to a downturn in the business cycle.
4. Connect the situation to the definition of cyclical unemployment: Since the layoffs are a result of decreased demand due to a weak economy, this aligns with the characteristics of cyclical unemployment.
5. Conclude that the type of unemployment best describing the workers' situation is cyclical unemployment, as it is directly related to the economic downturn and reduced demand for automobiles.