Final answer:
The federal government can combat cyclical unemployment by employing discretionary fiscal policies, such as stimulus packages, or automatic stabilizers like unemployment insurance and food stamps, to stimulate overall buying power and demand in the economy.
Step-by-step explanation:
The federal government can address cyclical unemployment through various fiscal policies. Cyclical unemployment, a type of unemployment that corresponds to the cyclical trends in growth and production within a business cycle, can be particularly problematic during times of recession.
When the economy slows down, businesses see a decrease in demand for their products and services, which can lead to layoffs and increased unemployment rates. To combat this, the government can stimulate the economy by either increasing government spending or cutting taxes, thus increasing the overall buying power within the economy.
Programs like unemployment insurance and food stamps, known as automatic stabilizers, also help by providing relief to those out of work and maintaining consumer buying power during economic downturns. Discretionary fiscal policy, such as the stimulus packages seen in 2009 and 2020, are explicit government actions that aim to increase aggregate demand and spur economic activity.