What causes involuntary unemployment?

Involuntary unemployment occurs when individuals are willing to work at prevailing wage rates but are unable to find jobs. A deficiency in aggregate demand is a primary cause of involuntary unemployment. When aggregate demand in an economy is low, businesses experience reduced sales and revenue, leading them to cut back on production and, consequently, their workforce. This situation creates a scenario where more people are seeking jobs than there are available positions, resulting in involuntary unemployment.

The other options do not contribute to involuntary unemployment in the same way. An excess of job openings typically indicates a robust job market, which would help reduce unemployment, not cause it. A surplus of skilled workers might lead to challenges for specific workers, but it does not create widespread involuntary unemployment. Lastly, high wages for low-skill jobs alone do not result in involuntary unemployment; rather, they may cause fewer positions to be filled, potentially leading to other forms of unemployment, such as voluntary unemployment, but not the involuntary type.