If There Is a Decrease in Government Purchases Along with a Decrease

question 16

Multiple Choice

If there is a decrease in government purchases along with a decrease in the marginal tax rate on labour income, then:

• A)the income effect would be toward a decrease in labour supply.
• B)the overall effect on labour supply is negative.
• C)the substitution effect would be towards a decrease in labour supply.
• D)all of the above.

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