Cyclical unemployment stems from business cycle downturns Steps:

• Define cyclical unemployment as joblessness due to reduced economic activity in recessions.
• Identify recession effects: aggregate demand falls temporarily, slowing production.
• Link to labor market: firms cut jobs as labor demand drops until recovery.
• Match to options: select the temporary demand-side cause.

Why D is correct:

• Cyclical unemployment arises from a temporary decline in aggregate demand during recessions, directly reducing firms' demand for labor per standard macroeconomic theory.

Why the others are wrong:

• A: Permanent labor supply decrease causes structural shifts, not recession-tied cycles.
• B: Permanent labor demand decrease indicates structural changes like technology, unrelated to temporary recessions.
• C: Temporary labor supply decrease leads to frictional issues, not economy-wide cyclical downturns.

Final answer: D