Macroeconomics › Section H · Unemployment › Topic H.3
Short-run causes: cyclical unemployment
When a recession hits, millions of people who would gladly work at the going wage cannot find jobs. Explaining why requires one key idea: wages adjust upward easily but resist falling.
In this topic
- A puzzle for supply and demand
- Cyclical unemployment
- Voluntary or involuntary?
- Laws and contracts
- Why firms avoid cutting pay
- The sticky-wage diagram in words
- Worked example: a recession with sticky wages
- Worked example: a real wage cut without a pay cut
- Booms are different
- Common mistakes to avoid
- Key takeaways
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