How does a tax on labor income influence the equilibrium quantity of employment?
What will be an ideal response?
A tax on labor income drives a wedge between the after-tax wage rate of workers and the before-tax wage rate paid by firms. The tax on labor income decreases the supply of labor. That is, for each before-tax wage rate, workers provide a lower quantity of labor when faced with a tax that lowers their after-tax wage. The decrease in labor supply raises the before-tax wage rate, even though the after-tax wage rate received by workers falls. The decrease in labor supply also means that the quantity of employment at full employment (i.e., equilibrium employment in the labor market) falls.
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Because of the existence of the aggregate demand multiplier, a $10 billion change in expenditure
A) shifts the aggregate demand curve by more than $10 billion. B) shifts the aggregate demand curve by $10 billion. C) shifts the aggregate demand curve by less than $10 billion. D) changes the slope of the aggregate demand curve so it is less stee
Suppose the quantity of gasoline is measured in gallons and the price of gasoline is measured in dollars. The price elasticity of demand is 0.67
If the price of gasoline was now measured in cents rather than dollars, the price elasticity of demand would now be A) 0.0067. B) 0.67. C) 6.7. D) 67.0.
There are few laws in economics. One is this: "As consumption of a good increases, the extra satisfaction received from consuming an additional unit of the good decreases.". This is known as the law of
a. demand b. diminishing total utility c. diminishing marginal utility d. diminishing marginal returns e. total utility
The purchase of a new house is included in government spending
a. True b. False Indicate whether the statement is true or false