The argument that an increase in government purchases increases labour supply relies on the assumption that
A)government purchases are substitutes for consumer purchases.
B)government purchases decrease the interest rate.
C)government purchases decrease the wealth of individuals.
D)government purchases are neutral.

Question

Quizplus · Accepted Answer

An increase in government purchases is assumed to decrease the wealth of individuals, prompting them to increase their labor supply to maintain their consumption levels.

The Argument That an Increase in Government Purchases Increases Labour