Asked by Faith Fanning on May 20, 2024
Verified
An increase in the unemployment rate would affect tax receipts and government expenditures by
A) reducing tax receipts and expenditures.
B) increasing tax receipts and expenditures.
C) reducing tax receipts and raising expenditures.
D) raising tax receipts and reducing expenditures.
E) reducing tax receipts and leaving expenditures unchanged.
Unemployment Rate
A measure of those in the labor force who are without employment and are searching for a job.
Tax Receipts
The revenue collected by the government through various forms of taxation.
Government Expenditures
Financial spending by the government on goods, services, and public projects, including healthcare, education, and infrastructure.
- Gain an understanding of the role of automatic stabilizers in economic systems and pinpoint specific examples.
- Evaluate the consequences of decisions in fiscal policy related to unemployment and inflation.
Verified Answer
TO
Tosha OsborneMay 22, 2024
Final Answer :
C
Explanation :
An increase in the unemployment rate implies a reduction in the number of people employed and earning taxable income. As a result, tax receipts would decline. At the same time, the government may have to increase its expenditure in unemployment benefits and other social welfare programs, leading to a rise in government expenditures. Therefore, the correct choice is (C) reducing tax receipts and raising expenditures.
Learning Objectives
- Gain an understanding of the role of automatic stabilizers in economic systems and pinpoint specific examples.
- Evaluate the consequences of decisions in fiscal policy related to unemployment and inflation.