Which of the following describes how employment insurance compensation and welfare payments are affected by the...

Which of the following describes how employment insurance compensation and welfare payments are affected by the state of the economy?

a.

When the economy is in a recession, payments automatically increase.

b.

When the economy enters a boom, payments automatically increase.

c.

When the economy goes into contraction, payments automatically decrease.

d.

When the economy is in a recession, payments automatically decrease.

Expert Solution

Option A is correct.

When an economy enters recession, there is less money in the hands at disposal to spend in the economy. When the payment automatically increases, there is disposable income which does not reduce the aggregate demand by a large extent. this is also a part of automatic stabalizer.

Rahul Sunny answered 2 years ago

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