Why Does a Temporary Increase in Government Purchases Increase Labour

question 40

Multiple Choice

Why does a temporary increase in government purchases increase labour supply in the classical model?

• A)The rise in government spending increases labour demand,increasing the real wage,and so people increase their labour supply.
• B)Increased government purchases make people better off,so they work more hours.
• C)The increase in current or future taxes needed to pay for the increase in government purchases reduces people's wealth.
• D)People prefer to work harder when the government is doing more for them.

Understand the concept of sunk costs, marginal costs, and their implications for decision-making.

Identify examples of fixed, variable, and sunk costs in various business scenarios.

Compute fixed costs from total costs and variable costs.

Understand the distinction between accounting profit and economic profit.

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Article 2

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