When the unemployment rate decreases, the budget:
A)will always be balanced.
B)surplus gets smaller or the deficit gets larger.
C)surplus gets larger or the deficit gets smaller.
D)is unaffected.

Question

Quizplus · Accepted Answer

When the unemployment rate decreases, it indicates that more people are employed and earning income, which in turn leads to an increase in tax revenues. This can result in an increase in the budget surplus or a decrease in the budget deficit, depending on the initial state of the budget. Therefore, choice C, stating that the surplus gets larger or the deficit gets smaller, is the correct answer.

When the Unemployment Rate Decreases, the Budget