A decrease in consumption and an increase in labor supply would result from
A) a decrease in tax rates.
B) a decrease in transfer payments.
C) an increase in transfer payments.
D) an increase in government spending.

Question

Quizplus · Accepted Answer

A decrease in transfer payments would lead to a decrease in disposable income, which would result in a decrease in consumption. An increase in labor supply implies people are willing to work more, which would happen if the government reduced transfer payments, as people would need to work more to maintain their standard of living.

A Decrease in Consumption and an Increase in Labor Supply