The unemployment compensation program:
A) makes recessions more severe.
B) makes recession less severe.
C) makes recessions more severe and inflationary episodes less severe.
D) makes recessions less severe and inflationary episodes more severe.
E) has no effect on the severity of recessions and inflationary episodes.

Question

Quizplus · Accepted Answer

The unemployment compensation program reduces the negative impact of recessions by providing financial assistance to unemployed individuals, which in turn boosts consumer spending and aggregate demand. This can help to mitigate the severity of a recession. However, it does not have a direct impact on inflationary episodes, so option C and D can be ruled out. Option A is incorrect as it suggests the program worsens recessions, which is not supported by evidence. Therefore, the best choice is B.

The Unemployment Compensation Program