An increase in unemployment benefits will tend to cause which of the following?

Question

Quizplus · Accepted Answer

An increase in unemployment benefits will increase the disposable income of the unemployed workers, which will increase their demand for goods and services. The increase in demand will cause an upward shift in the WS (wage-setting) curve as firms will need to hire more workers to meet the increased demand. This, in turn, will lead to an increase in employment and a decrease in unemployment.

An Increase in Unemployment Benefits Will Tend to Cause Which