If a tax cut increases people's labor supply, then the tax cut
A) decreases potential GDP because the real wage rate falls.
B) does not affect aggregate demand.
C) increases potential GDP.
D) decreases aggregate demand.
E) Both answers B and C are correct.
Correct Answer:
Verified
Q122: The supply-side effects show that a tax
Q123: Q124: Need-based spending -------------------- during an expansion and-------------------- Q125: Taxes that change with the level of Q126: A $100 million decrease in government expenditure Q128: When an economy faces an inflationary gap, Q129: If we look at the federal government Q130: If the nominal interest rate is 10 Q131: Ignoring any supply-side effects, if government expenditure Q132: The crowding out effect refers to the--------------------from--------------------in
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