What Happens to the Acceptable Wage Rate at Each Level

question 83

Multiple Choice

What happens to the acceptable wage rate at each level of employment once an income tax is levied on labour income?

• A) It increases by the amount of the tax that must be paid.
• B) Because workers have to work more to make up for the tax, the acceptable wage rate falls by some amount that cannot be determined.
• C) Workers and employers split the tax, so the acceptable wage increases by half the tax.
• D) Because workers have to work more to make up for the tax, the acceptable wage rate falls by the precise amount of the tax that must be paid.
• E) Nothing, it remains the same.

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Definitions:

Time Preference

The degree to which individuals prioritize current goods and services over future ones.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used in finance and investment analysis.

Interest Rate

The percentage at which interest is charged or paid on borrowed or saved money, often influencing economic activity.

Time Preference

An individual's preference for receiving goods or services sooner rather than later, reflecting the value of future goods as compared to present goods.