If the Labor Supply Curve Is Nearly Vertical,a Tax on Labor

question 20

Multiple Choice

If the labor supply curve is nearly vertical,a tax on labor

• A)has a large deadweight loss.
• B)raises a small amount of tax revenue.
• C)has little impact on the amount of work that workers are willing to do.
• D)results in a large tax burden on the firms that hire labor.

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Definitions:

Crowding-Out Effect

A situation where increased government spending leads to a reduction in private sector investment.

Fiscal Policy

The use of government spending and taxation to influence the economy.

Consumption Demand

The desire and ability of consumers to purchase goods and services in an economy, determining the overall level of consumption.

Automatic Stabilizers

Programs and policies in economics formulated to counter changes in a nation's economic status, without the need for more intervention from governmental bodies or policymakers.