Final answer:
To address cyclical unemployment, expansionary monetary policy is utilized to lower interest rates and increase money supply, while expansionary fiscal policy lowers taxes or boosts government spending. These stimulate economic output and decrease unemployment, unlike contractionary policies.
Step-by-step explanation:
The different policy tools for dealing with cyclical unemployment involve various economic strategies. One such strategy is expansionary monetary policy, which aims to lower interest rates and increase the supply of money in the economy. This can help stimulate demand for goods and services, leading to increased production and, consequently, reduced unemployment.
However, increasing interest rates and implementing contractionary fiscal policy are typically associated with efforts to slow down an overheated economy rather than addressing unemployment. Reducing government spending can often lead to a decrease in aggregate demand, which may increase unemployment. Therefore, in times of recession and high cyclical unemployment, expansionary fiscal policy (lower taxes or increased government spending) is often preferred to reduce unemployment levels.