When State Unemployment Funds Are Inadequate to Continue Paying Benefits

question 26

Multiple Choice

When state unemployment funds are inadequate to continue paying benefits to unemployed workers, the state can:

• A) declare bankruptcy
• B) levy additional taxes on an ad hoc basis, but no more than 10% in one year
• C) do nothing other than file a claim under any private unemployment insurance it may have purchased
• D) borrow from the federal government without paying interest

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Definitions:

Secondary Reserves

Liquid assets held by financial institutions that are not used for primary obligations but can be quickly converted to cash for emergency needs.

U.S. Government Securities

Financial instruments issued by the United States Department of the Treasury to finance federal government's expenditures.

Vault Cash

Currency and coins held by a bank in its vault and used to satisfy the bank's reserve requirements.

Securities

Financial instruments representing ownership (stocks), a creditor relationship with a government or corporation (bonds), or other rights to ownership or profit.