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Cyclical unemployment occurs when there is insufficient demand within the economy, meaning that producers do not need current amount of capital to satisfy demand for it's products, so he cuts his production and therefore sack workers. Government could intervene by increasing it's spending (which is an injection in the circular flow of income) and by decreasing income taxes, so consumers have more disposable income to spend on goods. Such policies would stimulate aggregate demand, meaning that suppliers need more factors of production and thus more workers to satisfy an increased demand. So they hire workers, therefore decreasing cyclical, or demand-defficient unemployment.
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