Chapter 17, Problem 9AA

To determine

To show: The four types of unemployment.

Explanation of Solution

The diagram below shows the four types of unemployment:

  

Figure (1)

The four types of unemployment are as explained below:

Cyclical unemployment: The unemployment that is caused due to fluctuations in the business cycle is termed cyclical unemployment. This kind of unemployment increases at times of recession and depressions and decreases during times of recovery and boom.

Structural unemployment: The unemployment that arises in an economy due to technological progress and discoveries. This is caused when computers replace workers in an economy and discoveries replace people or workers.

Seasonal unemployment: When unemployment arises due to change in weather and climatic situations. This kind of unemployment is seen mainly in the agriculture and construction sectors.

Frictional unemployment: The kind of unemployment that is caused due to different layoffs, firings and voluntary search for new jobs. This kind of unemployment is always found in an economy as there exists a time lag between leaving a job and finding a new job.