Reducing Transfer Payments to Boost Employment Incentives

Steps:

• Transfer payments are government benefits like unemployment aid, redistributed without direct exchange.
• Reducing them aims to lower welfare dependency and encourage work.
• Evaluate options: A links cuts to job-seeking incentives; others contradict or ignore the goal.
• Select A as it directly justifies benefit reductions.

Why A is correct:

• Transfer payments include unemployment benefits; reducing them removes safety nets, incentivizing job searches per economic incentive theory.

Why the others are wrong:

• B: Raising state taxes boosts revenue but does not address or reduce transfer payments.
• C: Increasing state pensions expands transfer payments, opposing the reduction.
• D: Increasing government expenditure likely raises overall spending, including transfers, contradicting the intention.

Final answer: A