The Government Increases the Sales Tax on All Goods

question 238

Multiple Choice

The government increases the sales tax on all goods.The government does not change the tax on income earned from labor.What happens in the market for labor?

• A)The quantity of labor demanded decreases, but the demand for labor does not shift.
• B)The demand for labor decreases.
• C)The supply of labor increases.
• D)There is no change in the labor market.

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Definitions:

Economic Growth

An increase in the production of goods and services in an economy over a period of time, typically measured by GDP.

Equally-Weighted Portfolio

An investment portfolio in which each asset is allocated the same proportion of the total investment, regardless of the asset's market value.

Short Sell

The practice of selling a borrowed security with the intention of buying it back later at a lower price to profit from the price difference.

Arbitrage Pricing Theory

A financial model that estimates the return of an asset by considering multiple risk factors and their respective risk premiums, excluding unsystematic risk through diversification.