Question

What are the two types of unemployment problems?

Short answer

Cyclical unemployment and frictional unemployment are the 2 main types of unemployment problems.

Step-by-step solution

Step 1. Meaning of unemployment.

Unemployment is the situation when a person who does not have a job is looking for one and is willing to work but is not able to find a job.

Step 2. Types of unemployment problems found in high income nations.

a) Cyclical Unemployment- This type of unemployment occurs because of the cyclical trends in the business cycle. Cyclical unemployment will be low when business cycles are at their peak because economic activity is high.When there is a recession, that is, output level declines cyclical unemployment will rise.

b) Natural unemployment- This kind of unemployment includes structural and frictional unemployment. Frictional unemployment is caused due to people moving between jobs, career or location. Structural unemployment is caused when there is a mismatch between the skills possessed and skills demanded in the market.