Suppose the banking industry were to fail,leaving the federal government (through its deposit guarantee programs)to pay for trillions of dollars in losses: they do so by imposing a tax of 50% on all individuals' wealth.What happens to current employment and the real wage rate?
A)Both employment and the real wage rate would increase.
B)Both employment and the real wage rate would decrease.
C)Employment would increase and the real wage would decrease.
D)Employment would decrease and the real wage would increase.

Question

Quizplus · Accepted Answer

A 50% wealth tax would reduce individuals' disposable income, leading them to supply more labor to maintain their consumption levels, thus increasing employment. However, the increased labor supply would put downward pressure on the real wage rate.

Suppose the Banking Industry Were to Fail,leaving the Federal Government