Cyclical unemployment
Definition. Cyclical unemployment is unemployment caused by a deficiency in aggregate demand during a downturn or recession, when firms produce less and therefore need fewer workers. It is also called demand deficient unemployment and rises and falls with the business cycle.
It can be reduced by expansionary fiscal or monetary policy that boosts aggregate demand. It contrasts with structural unemployment, which stems from a mismatch of skills or location.
This term belongs to Unemployment in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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