Cyclical unemployment occurs when there is a downturn in the economy, leading to a decrease in demand for goods and services. This type of unemployment is closely linked to the business cycle, which includes periods of expansion and contraction. During economic recessions, companies may reduce their workforce to cut costs, resulting in job losses. As the economy improves and demand increases, cyclical unemployment typically decreases. Governments and policymakers often implement measures, such as stimulus packages, to boost economic activity and reduce this type of unemployment. Understanding cyclical unemployment helps in addressing the challenges faced during economic downturns.