Suppose the federal government increases the unemployment benefits financed by higher income taxes. In this case, which of the following is likely to occur?

Question

Quizplus · Accepted Answer

When unemployment benefits increase, it implies that unemployed individuals will receive their benefits without work, which may lead to the reduction in the supply of labor. The reason behind this is that unemployed workers may not feel the urgency to search for a job since the benefits may sustain them for an extended period. Therefore, the supply of labor will reduce due to the disincentive effect that it has on unemployed individuals.

Suppose the Federal Government Increases the Unemployment Benefits Financed by Higher