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particular industry and region. For example, the U.S. textile industry, located



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particular industry and region. For example, the U.S. textile industry, located 
primarily in the South, can fight less expensive foreign textile imports by 
installing modern machinery. 
Cyclical
unemployment is directly attributable to 
the lack of jobs caused by the business cycle. Cyclical unemployment is 
unemployment caused by the lack of jobs during a recession. When real GDP 
falls, companies close, jobs disappear, and workers scramble for fewer available 
jobs. Similar to the game of musical chairs, there are not enough chairs (jobs) 
for the number of players (workers) in the game. Because both frictional and 
structural unemployment are present in good and bad times, full employment 
does not mean “zero percent unemployment.” 
Full employment is the situation in which an economy operates at an 
unemployment 
rate equal to the sum of the frictional and structural unemployment rates. Full 
employment therefore is the rate of unemployment that exists without cyclical 
unemployment. 
Ex. 1.
Choose the right answer according to the text and your background 
knowledge. Explain your choice. 
1. The number of people officially unemployed is not the same as the number 
of people who can’t find a job because: 


a. people who have jobs continue to look for better ones; 
b. the armed forces is included; 
c. discouraged workers are not counted; 
d. none of the above; 
e. all of the above. 
2. Frictional unemployment refers to: 
a. unemployment related to thee ups and downs of the business cycle
b. workers who are between jobs; 
c. people who spend relatively long periods out of work; 
d. people who are out work and have no job skills. 
3. A mismatch of the skills of unemployed workers and the skills required for 
existing jobs is defined as: 
a. involuntary unemployment
b. cyclical unemployment
c. structural unemployment; 
d. frictional unemployment. 
4. Unemployment caused by a recession is called: 
a. structural unemployment; 
b. frictional unemployment
c. involuntary unemployment; 
d. cyclical unemployment. 
5. Full employment occurs when the rate of unemployment consist of: 
a. seasonal plus structural plus frictional unemployment; 
b. cyclical plus frictional unemployment; 
c. structural, frictional, and cyclical unemployment; 
d. none of the above. 

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