Question

At which stage of the trade cycle would cyclical unemployment be at its highest?

A. Recession
B. Expansion
C. Peak
D. Trough

Answer 1

Cyclical unemployment would be at its highest during a recession, which is characterized by a contraction in economic output.

Step-by-step explanation:

Cyclical unemployment is the type of unemployment that occurs due to downturns in the business cycle. It is caused by a decrease in overall economic activity and often coincides with a recession. Therefore, cyclical unemployment would be at its highest during a recession, which is characterized by a contraction in economic output. During a recession, businesses may have to downsize or close, resulting in job losses and increased unemployment rates.

For example, during the most recent recession caused by the COVID-19 pandemic, many businesses shut down temporarily or permanently, leading to a surge in cyclical unemployment.