CFA Level I · CFA Level I Exam · Understanding Business Cycles
A manufacturing region loses many jobs because its industry is replaced by automation, and the displaced workers lack the skills needed for newly created jobs elsewhere. This unemployment is best described as:
This is structural unemployment. Automation changed the kinds of skills employers need, and the displaced workers lack them, creating a lasting mismatch. Frictional unemployment is brief search time between jobs, and cyclical unemployment arises from weak demand during recessions.
- Acyclical unemployment.
- Bstructural unemployment.Correct
- Cfrictional unemployment.
Explanation
Structural unemployment results from a mismatch between workers' skills or location and the requirements of available jobs, often caused by technological change. Frictional unemployment is short-term job searching between jobs. Cyclical unemployment stems from weak aggregate demand in downturns.
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