Answer to Question #168908 in Macroeconomics for ABINASH

Question

example of Cyclical and Structural Unemployment

Answer 1

Cyclical unemployment is a type of unemployment where labor forces are reduced as a result of fluctuations in the economy or business cycles. As an example we can consider the automobile industry during the contraction phase of the business cycle. The consumer demand on automobiles decreases and, as a result, the manufacturer decides to decrease the supply and leave a small number of workers to deal with that decreased supply.

Structural unemployment is a type of unemployment caused by a mismatch of skills between the unemployed and available jobs (it causes by deindustrialisation, for example). Shut down of the coal mining jobs in UK and other countries is an example of structural unemployment. As a result, some unemployed workers unable to find work in new industries with different skill requirements.