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Explain how frictional unemployment differs from cyclical unemployment. [4]

Quick Answer:

Logical explanation which might include: Frictional unemployment arises from people being in between jobs (1) may be waiting for a better paid job / may be seasonally unemployed / may have worked on a short-term contract / may lack information about vacancies (1) may exist even when there is full employment / may be self-correcting (1). Cyclical unemployment is caused by a lack of total (aggregate) demand (1) more people unemployed than there are job vacancies (1) may arise from a recession / economic downturn (1) may need government action to reduce it (1). Frictional unemployment would be reduced by a rise in labour mobility (1) cyclical unemployment would not be (1). Frictional unemployment may be short term (1) cyclical unemployment may be long term (1).

Unemployment refers to people of working age who are actively looking for a job but who
are not employed. Frictional unemployment occurs when workers are between jobs. Workers
may leave their job because they have been fired, or because their employer went out
of business, or because they are in search of a better job, or they may be waiting to start
a new job. Frictional unemployment tends to be short term, and does not involve a lack
of skills that are in demand. On the other hand, cyclical unemployment occurs during the
downturns of the business cycle, when the economy is in a recessionary gap. As real GDP
falls due to a fall in AD. cyclical unemployment increases because firms lay off workers.
Cyclical unemployment can happen over a longer period of time and involves government
intervention in form of expansionary fiscal and monetary policy to increase aggregate
demand and reduce cyclical unemployment.

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