Final answer:
Cyclical unemployment can result when wages are sticky or inflexible and are unlikely to fall. Stickiness in wages mean they do not adjust quickly to economic downturns, leading to unemployment. Economic theories like implicit contracts and efficiency wage theory explain why wages are often resistant to downward movement.
Step-by-step explanation:
When wages are sticky or inflexible and unlikely to fall, cyclical unemployment can result. Wages might be sticky downward due to various economic theories, including implicit contracts, efficiency wage theory, and relative wage coordination. The concept of sticky wages explains why wages decline very slowly, if at all, making it hard to restore the economy to full employment upon a downturn. This stickiness can lead to short-run or long-run unemployment as businesses cannot adjust wages downward in response to economic conditions, causing a discrepancy between the supply and demand of labor, with consequent increases in unemployment.