Which of the following is the best definition of cyclical unemployment?

• A. Unemployment that occurs when there is a mismatch between workers' skills and available jobs.
• B. Unemployment that results from fluctuations in the business cycle, such as recessions.
• C. Unemployment that persists due to long-term changes in the economy, such as technological advancements.
• D. Unemployment caused by workers voluntarily leaving their jobs to search for new ones.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of cyclical unemployment. It refers to unemployment that arises due to changes in the overall economic activity, particularly during downturns or recessions in the business cycle.
2. Step 2: Recognize that cyclical unemployment is different from other types of unemployment such as structural unemployment (caused by mismatches between skills and jobs) and frictional unemployment (caused by voluntary job transitions).
3. Step 3: Identify that cyclical unemployment increases when the economy is in a recession because demand for goods and services falls, leading to layoffs and fewer job opportunities.
4. Step 4: Note that cyclical unemployment decreases when the economy recovers and expands, as businesses hire more workers to meet increased demand.
5. Step 5: Conclude that the best definition of cyclical unemployment is the one that links it directly to fluctuations in the business cycle, such as recessions, rather than to skill mismatches, long-term economic changes, or voluntary job searching.