If a policy maker wants to change taxes to encourage individuals to increase their labor supply, the policy maker should
A) reduce taxes by a lump-sum amount.
B) increase taxes by a lump sum.
C) reduce the income tax rates that individuals pay.
D) increase the income tax rates that individuals pay.

Question

Quizplus · Accepted Answer

If the policy maker wants to encourage individuals to increase their labor supply, reducing the income tax rates that individuals pay will provide an incentive for individuals to work more since they get to keep a larger portion of the money they earn. This will increase their labor supply and potentially lead to greater economic growth.

If a Policy Maker Wants to Change Taxes to Encourage