Multiple Choice Question Help (1 Viewer)

[cliches]

What is the impact of an economic expansion on government revenues and expenditure?

(A) Both progressive taxation receipts and unemployment benefit payments increase.

(B)Both progressive taxation receipts and unemployment benefit payments decrease.

(C)Progressive taxation receipts decrease and unemployment benefit payments increase.

(D) Progressive taxation receipts increase and unemployment benefit payments
decrease.

Apparantly the Answer is D
But if there is an economic expansion that means the government can tax more and thus, government revenues will increase and expenditure will increase on unemployment benefits wouldn't it?
I thus said A.
Could anyone give me a detailed explanation on why it is D ?

 

[OzKo]

If there is an economic expansion, there is an implicit assumption that less people will be unemployed (i.e. more jobs). Consequently, the government spends less on welfare.

 

[cliches]

Ahh! i see. That's true thank you!
do you by any chance know what asset stripping is?

 

[bobmcbob365]

In economic expansion, there is economic growth. In economic growth, there is a decrease in cyclical unemployment. With less people unemployed, the government pays out unemployment benefit payments to less people. Thus unemployment benefit payments decrease.

Also, in economic growth, there is generally some sort of wage growth, and this pushes more people up the tax brackets, as more people are paying a higher proportion of their income as tax, which means tax receipts increase.