ECON102: Principles of Macroeconomics (2024.A.01)

This video explores the labor market effects and role in creating short-run recessionary or inflationary gaps and re-establishing the economy's long-term equilibrium. We can define cyclical unemployment as unemployment due to recessionary events in an economy. A general economic downturn means less spending, which means more layoffs and an increased group of cyclically unemployed people.

Cyclical unemployment is the only type of unemployment of the three we discussed in Unit 2 (frictional, structural, and cyclical) that is avoidable and can be minimized – it is completely due to recessionary gaps.