The government is considering raising the tax rate on labor income and asks you to report on the supply-side effects of such an action. Use appropriate graphs and report directions of change, not exact magnitudes. What will happen to: i. The supply of labor The demand for labor and why? Equilibrium employment and why? ii. iii. iv. The equilibrium before-tax wage rate and why? The equilibrium after-tax wage and why? V. vi. Potential GDP?

The government is considering raising the tax rate on labor income and asks you to report on the supply-side effects of such an action. Use appropriate graphs and report directions of change, not exact magnitudes. What will happen to: i. The supply of labor The demand for labor and why? Equilibrium employment and why? ii. iii. iv. The equilibrium before-tax wage rate and why? The equilibrium after-tax wage and why? V. vi. Potential GDP?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 3P

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