Unemployment compensation and welfare payments tend to stabilize the economy by
A) holding government expenditures at a constant level.
B) accelerating the decrease in disposable income caused by a fall in GDP.
C) reducing corporate dividends when GDP increases.
D) being financed by taxes whose revenues rise and fall as the level of employment rises and falls.
E) equalizing the burden of inflation.

Question

Quizplus · Accepted Answer

Unemployment compensation and welfare payments are financed by taxes, which increase or decrease as the level of employment changes. This helps to stabilize the economy by ensuring that government spending remains relatively constant, even during times of economic recession or expansion. Additionally, these payments help to provide a safety net for individuals and families who may be struggling financially, which can help to reduce the impact of economic downturns on the overall economy.

Unemployment Compensation and Welfare Payments Tend to Stabilize the Economy