Suppose That the Government Increases the Child Tax Credit,which Increases

question 135

Multiple Choice

Suppose that the government increases the child tax credit,which increases the after-tax income of families with children.How will this decision affect the amount of labor supplied by parents,assuming that leisure is a normal good?

• A)Since the income and substitution effects move in the same direction,the amount of labor supplied will increase.
• B)Since the income effect will dominate the substitution effect,the amount of labor supplied will decrease.
• C)We don't know what will happen to the quantity of labor supplied,since we don't know whether the income effect or substitution effect will dominate.
• D)The labor supply curve will shift right,so the quantity of labor will also increase.

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Definitions:

United States

A country in North America consisting of 50 states and a federal district, known for its significant influence on world politics, economy, and culture.

National Income

The total value of all goods and services produced by a country's economy over a specific period, accounting for income earned domestically and abroad.

United States

A nation in North America that encompasses 50 states, a federal district, five significant self-governing territories, and a collection of possessions.

Human Capital

The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community.