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

question 45

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 an increase in labour supply.
• B)the overall effect on labour supply is positive.
• C)the substitution effect would be towards an increase in labour supply.
• D)all of the above.

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Definitions:

Intercostal Muscles

Muscles located between the ribs that assist with the breathing process by expanding and contracting the ribcage.

External Iliac Vein

A large vein in the pelvic region that carries deoxygenated blood from the lower limbs back to the heart.

Iliac Vein

A vein in the pelvis that carries blood from the lower limbs and the pelvis back to the heart.

Posterior Vena Cava

Also known as the inferior vena cava, it is a large vein that carries deoxygenated blood from the lower half of the body to the heart.