Which is a direct effect of unemployment on tax revenue?

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Multiple Choice

Which is a direct effect of unemployment on tax revenue?

Explanation:
Unemployment directly reduces the amount of income that people earn, so the government collects less from income tax and social security contributions tied to wages. With fewer wages being paid, the main tax receipts shrink, making tax revenue fall. While unemployment can also affect VAT and corporate tax indirectly through lower spending and profits, the direct impact most directly tied to unemployment is a fall in tax revenue.

Unemployment directly reduces the amount of income that people earn, so the government collects less from income tax and social security contributions tied to wages. With fewer wages being paid, the main tax receipts shrink, making tax revenue fall. While unemployment can also affect VAT and corporate tax indirectly through lower spending and profits, the direct impact most directly tied to unemployment is a fall in tax revenue.

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