During a recession, which of the following does unemployment insurance ensure?
A) that the disposable income of those who are unemployed will increase above the usual level
B) that disposable income does NOT fall by as much as GDP decreases
C) that disposable income increases as GDP falls
D) that the marginal propensity to consume increases

Question

During a recession, which of the following does unemployment insurance ensure?  
A) that the disposable income of those who are unemployed will increase above the usual level 
B) that disposable income does NOT fall by as much as GDP decreases 
C) that disposable income increases as GDP falls 
D) that the marginal propensity to consume increases

Quizplus · Accepted Answer

Unemployment insurance ensures that the disposable income of those who are unemployed does not fall as much as GDP decreases. It provides temporary financial assistance to workers who have lost their jobs due to no fault of their own, thus helping them maintain their level of consumption and preventing a sharp decline in aggregate demand. However, it does not increase disposable income or the marginal propensity to consume.

During a Recession, Which of the Following Does Unemployment Insurance