Unemployment is a scary thing. The mortgage is still to be paid; the electricity must remain on. This is scary for someone out of work. Having people out of work for long periods of time is scary for everyone. To be considered unemployed, someone must be out of work, but still actively looking for work. When someone is unemployed, the government provides monetary assistance that is partly untaxed. A high unemployment rate means that the government has to shell out more money from the budget to support large numbers of the unemployed. This creates a heavy burden on the budget and cuts in other sectors as unemployment assistance is intended to help support basic needs. Wealth is drained from the economy for unproductive purposes and economic growth slows as there is less funding for infrastructure development. Furthermore, job creation for a high percentage of unemployed becomes a challenge. The circular flow of income is the lifeline of a thriving economy. Unemployment slows this flow due to the lack of inflows and outflows of money. When money is not pumped into the economy, its growth becomes slow. An economy may show signs of jobless recovery with a continued increase in the unemployment rate. Such growth could lead to a slow recovery from recession in the future, or it could be an indicator of a double-dip recession. Due to increased competition for jobs and widespread availability of labor, the cost of labor decreases significantly. Those who have jobs will be severely affected if unemployment increases in the economy. Noticeably, the reduction in wages and salaries leads to a decrease in the amount of income taxes collected. This further hinders the scope of availability… middle of the paper… I make the same salary as they did before. This increases the debt owed by those families. Usually the amount of unemployment benefits is not enough to keep this cycle going. Many people default on credit cards as their debt continues to grow, not unlike our government. The government extended unemployment benefits and paid them. While the government can borrow money indefinitely, I don't think that's a good idea. I think at some point the government will have to become a little more solvent. People receiving unemployment benefits don't pay as much taxes. They also have less money to spend, which further reduces the amount of money the government makes. Most unemployed people are eligible for tax credits, so the government is actually paying more than just unemployment benefits.