People increase their labor supply in response to a temporary increase in government purchases because
A)current or future taxes will increase, making them financially worse off.
B)they need to work more to keep up with their neighbors.
C)interest rates will rise, causing a substitution effect.
D)higher spending today will lead to higher spending in the future, as well.

Question

Quizplus · Accepted Answer

A temporary increase in government purchases often implies that taxes will rise in the future to pay for the increased spending, making people feel financially worse off. As a result, they may increase their labor supply to maintain their standard of living.

People Increase Their Labor Supply in Response to a Temporary