If we compare the United States to France, we see that potential GDP per person in France is ________ that in the United States because the French tax wedge is ________ the U.S. tax wedge.

Question

Quizplus · Accepted Answer

Potential GDP per person in France is less than that in the United States because the French tax wedge (the difference between what employers pay in wages and what workers receive after taxes) is larger than the U.S. tax wedge. A larger tax wedge can reduce the incentive to work or invest, potentially leading to lower levels of labor participation or productivity, and thus, a lower potential GDP per person.

If We Compare the United States to France, We See