A decrease in the income tax rate O b. O a. increases the tax wedge. decreases potential GDP. c. decreases the demand for labor. d. increases the supply of labor.
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- An increase in an effective federal minimum wage would tend to cause O A. a decrease in wage rates and an increase in employment O B. an increase in wage rates and employment OC.a decrease in wage rates and employment D. an increase in wage rates and a decrease in employmentWhat is the effect of an increase in the income tax rate and more generous unemployment benefits on the labor market? An increase in the income tax rate and more generous unemployment benefits O A. decreases the supply of labor; increase the demand for labor B. decreases the supply of labor; decrease the supply of labor C. increases the demand for labor; increase the demand for labor D. increases the demand for labor; decrease the supply of labor Click to select your answer. 80 000 888 F7 F6 F5 F4 esc F2 F3 F1 2$ % 1 2 3 4 W E R コ TA change to personal income tax rates has both an income and a substitution effect on labor supply. If personal income tax rates decline, a. the income effect would lead people to decrease labor supply while the substitution effect would lead people to increase labor supply b. the income effect would lead people to increase labor supply while the substitution effect would lead people to decrease labor supply c. both the income effect and the substitution effect would lead people to increase labor supply d. both the income effect and the substitution effect would lead people to decrease labor supply
- Because the minimum wage is not indexed to inflation, when there is inflation thenominal minimum wage. and the real minimum wage. A. remains constant; remains constant B. None of the above OC. increases; decreases D. remains constant; decreases OE. decreases; remains constantThe figure shows the labour market when an income tax is imposed. The tax wedge is 000 A. $15 an hour B. 50 billion hours OC. $10 an hour OD. $5 an hour. Click to select your answer. 50- 40- 30+ 20- 10- 35 30 W 0+ Real wage rate (2007 dollars per hour) LS+ tax LS 20 50 200 250 350 150 250 Labour (billions of hours per year) LD 450Efficiency wage theory suggests that workers will be paid less than their reservation wage. OA. O B. unskilled workers will have a lower turnover rate than skilled workers. O.productivity might drop if the wage rate is too low. O D. the government can only set tax rates so high before people will prefer not to work. firms will be more resistant to wage increases as the labor market tightens. OE.
- Table 4.6 shows the amount of savings and barrowing in a market for loans lo purchase homes, measured in millions of dollars, at various interest rates. What is the equilibrium interest rate and quantity in the capital financial market? How can you tell? Now, imagine that because of a shift in the perceptions of foreign investors, the supply curve shifts so that there will be 10 million less supplied at every interest rate. Calculate the new equilibrium interest rate and quantity, and explain why the direction of the interest tale shift makes intuitive sense.d. Explain how a 10% wage tax would a§ect the way in which the Örm chooses to produce any given amount of outputHow does an increase in labor-productivity increase income? a. An increase in productivity, increases the marginal product of labor which increases the demand for labor. As demand for labor increases, the wage rate increases. b. An increase in productivity, decreases the marginal product of labor which increases the demand for labor. As demand for labor increases, the wage rate increases. c. An increase in productivity, increases the marginal product of labor which decreases the demand for labor. As demand for labor decreases, the wage rate increases. d. An increase in productivity, increases the marginal product of labor which decreases the demand for labor. As demand for labor decreases, the wage rate decreases.
- What would be the predicted impact on the labor market of a decrease in non-wage income, as well as an increase in the price of machines? a. An increase in equilibrium wage, and an indeterminate change in equilibrium quantity of labor. b. A decrease in equilibrium wage, and an indeterminate change in equilibrium quantity of labor. C. An indeterminate change in equilibrium wage, and an increase in equilibrium quantity of labor. O d. An indeterminate change in equilibrium wage, and a decrease in equilibrium quantity of labor.Problem 2. The effects of a tax on labor income. Use the labor market graph below to help answer the questions. wage rate ($) 36 32 28 24 20 20 16 12 8 4 Suppl Deman Hours of work per week (millions) 200 400 600 800 1000 1200 1400 1600 1800 a.) The equilibrium wage is and the equilibrium quantity of labor is b.) Now suppose that the government imposes a tax of $6 on workers. i.) Show the effects on the graph. The new equilibrium wage is quantity of labor is ii.) How much of the $6 tax are workers actually paying? $ paying? $ iii.) Show the excess burden (deadweight loss) of the tax. iv.) What is the total tax revenue raised? $ and the equilibrium How much are their employers c.) Suppose that this is actually the Social Security tax, which levies half of the tax on workers and half of the tax on firms. Use the graph above (or paste a new one in below) that shows the effects of this tax if it were instead split between firms and workers. • What will be the new equilibrium wage now? • How…10. If the labour supply curve is nearly flat, what will a tax on labour do? a. have a large deadweight loss b. raise small amounts of tax revenue c. have little impact on the amount of work workers are willing to do d. shift the labour demand curve to the right