When the productive capacity of the economic system of a state is inadequate to create a sufficient number of jobs for all people who are willing and able to work, this situation is called _______.

Introduction / Context:
Structural unemployment is an important concept in economics and Indian economy questions because it explains why joblessness can persist even when people are actively seeking work. This question tests whether the learner can correctly identify the type of unemployment that arises when the productive capacity and structure of an economy are not sufficient to create enough suitable jobs for everyone who wants to work. Understanding this concept is useful for interpreting long term unemployment, labour market reforms and development policies.

Given Data / Assumptions:
- The economic system of a state does not have adequate productive capacity.
- There are not enough jobs for all willing and able workers.
- The shortage of jobs is due to the structure and capacity of the economy, not just seasonal or temporary factors.
- We are asked to name the type of unemployment that best describes this situation.

Concept / Approach:
Unemployment can be classified into several types such as structural, seasonal, disguised and cyclical unemployment. Structural unemployment arises when there is a mismatch between the skills of workers and the jobs available or when the economy is not capable of providing sufficient employment opportunities because of its underlying structure. Seasonal unemployment occurs only during a particular season, cyclical unemployment is linked to ups and downs in the business cycle, and disguised unemployment occurs when more people are employed than actually needed for a given level of output. Since the question clearly mentions inadequate productive capacity of the whole system, the relevant concept is structural unemployment.

Step-by-Step Solution:
Step 1: Focus on the phrase “productive capacity of the economic system of a state is inadequate”. This indicates a deep, long term limitation in the economy, not a short term or seasonal issue. Step 2: Recognise that when an economy cannot generate enough jobs for all willing and able workers because of its structure, the type of unemployment is typically called structural unemployment. Step 3: Compare this with seasonal unemployment, which only appears during particular seasons, such as off season in agriculture or tourism, and not because the entire economic system lacks capacity. Step 4: Compare it with disguised unemployment, where more people are employed than necessary, often in agriculture, but there are still jobs being done even if productivity per worker is low. Step 5: Compare it with cyclical unemployment, which appears during recessions and disappears during booms, whereas the question refers to inadequate capacity in general, not temporary downturns. Step 6: From these comparisons, it is clear that the correct term for unemployment due to inadequate productive capacity of the system is structural unemployment.

Verification / Alternative check:
A quick check is to see whether improving macroeconomic demand alone would solve the problem. If unemployment remains high even when demand is strong because the economy lacks the right industries, infrastructure or skills, then the situation is structural. In that case, policies like retraining workers, changing industrial structure, and building infrastructure are needed. This matches the situation described in the question, which is about inadequate productive capacity, so structural unemployment is confirmed as the correct choice.

Why Other Options Are Wrong:
Seasonal unemployment is wrong because it results from predictable seasonal patterns in jobs, such as harvesting periods, not from fundamental inadequacy of productive capacity.
Disguised unemployment is wrong because it refers to surplus labour where some workers could be removed without reducing output, usually in agriculture, and not necessarily to a shortage of jobs overall.
Cyclical unemployment is wrong because it is associated with recessions and booms in the business cycle, not with the long term structure and capacity of the economy.

Common Pitfalls:
Learners often confuse structural unemployment with disguised unemployment because both can be long term. However, disguised unemployment is about too many people sharing a given amount of work, while structural unemployment is about too few suitable jobs compared to the labour force. Another common mistake is to think of any long term unemployment as cyclical, forgetting that cyclical unemployment should disappear as the economy recovers, whereas structural unemployment persists until deeper reforms are made. Reading the phrase “productive capacity of the economic system is inadequate” carefully helps avoid these mistakes.

Final Answer:
The situation where the productive capacity of the economic system of a state is inadequate to create enough jobs is called structural unemployment.