Suppose the Government Increases Unemployment Benefits, Which Are Paid for with Higher

question 57

Multiple Choice

Suppose the government increases unemployment benefits, which are paid for with higher taxes on earnings. If the marginal propensity to consume is the same for both the beneficiaries of the unemployment benefits and the workers paying taxes, _____

• A) GDP will first increase and then fall.
• B) there will be no change in real GDP.
• C) real GDP will increase substantially.
• D) real GDP will fall substantially.
• E) GDP will first fall and then increase.

---

Definitions:

Rent

A periodic payment made to an owner or landlord for the use of a property, building, or piece of land.

Neighborhood

A geographically localized community within a larger city, town, or suburb, often characterized by social interactions and shared amenities among residents.

Theory of Profit

A concept that explains how profit emerges from the difference between a firm's revenues and its costs and how it acts as an incentive for business operations.

Joseph Schumpeter

An economist known for his theories on business cycles, innovation, and economic development, including the concept of "creative destruction."