State two ways a government can reduce cyclical unemployment.

Cyclical unemployment is caused by a downturn in the business cycle, leading to insufficient aggregate demand. To combat this, the government can use expansionary policies. - **Expansionary Fiscal Policy:** This involves increasing government spending (e.g., on infrastructure projects) or cutting taxes (e.g., income tax or corporation tax). Both actions increase aggregate demand, encouraging firms to produce more and hire more workers. - **Expansionary Monetary Policy:** This is usually carried out by the central bank. It involves cutting interest rates to make borrowing cheaper for consumers and businesses, stimulating consumption and investment. This also boosts aggregate demand.