Increasing the income tax rate ________ the before-tax real wage rate and ________ the after-tax real wage rate.

Name: Increasing the income tax rate ________ the before-tax real wage rate and ________ the after-tax real wage rate.
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Question

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Increasing the income tax rate reduces the after-tax real wage rate because a higher percentage of income is taken in taxes. It also reduces the before-tax real wage rate because the higher tax rate reduces the incentive to work.

Increasing the Income Tax Rate ________ the Before-Tax Real Wage