Q.Explain the concept of cyclical unemployment.

Cyclical unemployment occurs in the depression phase of the trade cycle when demand and output fall and workers are laid off; it fades in the boom phase. It is typical of industrial economies.

Cyclical unemployment is caused by the fluctuations of the business (trade) cycle:

• A market economy passes through phases of boom and depression.
• During a depression/recession, aggregate demand falls, so firms cannot sell their output, they cut production and lay off workers — causing widespread unemployment.
• This unemployment is temporary and general; when the economy recovers (boom), demand and production rise again and workers are re-employed. …