Which type of unemployment is caused by economic downturns?

Cyclical unemployment is directly linked to economic downturns and fluctuations in the business cycle. It occurs when there is a reduction in overall demand for goods and services in an economy, leading businesses to cut back on production and reduce their workforce. During periods of recession, companies typically experience less sales and therefore may lay off workers or not hire new employees, which increases the rate of unemployment.

This particular type of unemployment contrasts with frictional unemployment, which is associated with workers transitioning between jobs or entering the workforce for the first time, and structural unemployment, which results from mismatches between skills and job requirements. Seasonal unemployment arises from changes in the demand for labor at different times of the year, such as agricultural or holiday-related work. In summary, cyclical unemployment is specifically the type that arises during economic downturns, making it the correct answer in this context.