Unemployment compensation payments:
A. rise during a recession and thus reduce the severity of the recession.
B. rise during a recession and thus increase the severity of the recession.
C. rise during inflationary episodes and thus reduce the severity of the inflation.
D. fall during a recession and thus increase the severity of the recession.
Answer: A
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Refer to Figure 24-3. Suppose the economy is at point C. If government spending decreases in the economy, where will the eventual long-run equilibrium be?
A) A B) B C) C D) D
The expenditure multiplier indicates that
a. changes in investment, government, or consumption spending can trigger much larger changes in output. b. an increase in saving will cause output to rise by a multiple of the additional saving. c. a market economy will be more stable than classical economists thought. d. the marginal propensity to consume is greater than one.