Unemployment ldquo rises like a rocket and falls like a feather rdquo When a recession starts and co...........

Economic Affairs Employment related Issues

Unemployment “rises like a rocket and falls like a feather.” When a recession starts and companies look for ways to manage slowing demand for the goods and services that they sell, many may resort to laying off workers to cut costs. This may be a case of

1. Structural unemployment

2. Cyclical unemployment

Select the correct answer using the codes given below:

1 only

2 only

Both 1 and 2

None of the above

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Explanation:

Cyclical unemployment is an unemployment that relates to the cyclical trends in growth and production in a business cycle. When business cycles are at their peak, cyclical unemployment will be low because total economic output is being maximized. When economic output falls cyclical unemployment will rise. Recession is slowdown of economic activities. It is the result of businesses not having enough demand. The lack of demand comes from a lack of spending and consumption in an economy. This causes in turn job cuts or unemployment.
Structural unemployment is unemployment caused by a mismatch between the present skills of worker and the skills demanded by employers. It is also known as the skills gap. Structural unemployment is often brought about by technological changes.