Answer to Question #92147 in Macroeconomics for Fulai Li

Question

Cutting the deficit over the next four years​ ______.
A.
definitely decreases the number of jobs
B.
increases or decreases the number of jobs but we​ don't know for sure
C.
definitely increases the number of jobs
D.
has no effect on the number of jobs

Answer 1

Answer B

When budget deficit is cut and tax evasion that leads to a loss of equivalent amount of government revenue will not cause a decrease in employment while cutting budget deficit by increasing tax rates will definitely increase the unemployment rate because the purchasing power of consumers will decrease therefore limiting new investments that lead to employment opportunities.