Using the labor market in the stylized DSGE model, from workers' perspectives, which of the following would be beneficial to them?
i. A reduction in the sales tax rate
ii. A reduction in the income tax rate
iii. A reduction in TFP
A) ii
B) ii and iii
C) iii
D) i, ii, and iii
E) i and ii

Question

Quizplus · Accepted Answer

From workers' perspectives, a reduction in income tax can increase their disposable income and a reduction in sales tax can increase their purchasing power. However, a reduction in TFP would decrease the demand for labor, leading to lower wages and fewer job opportunities, which is not beneficial to workers. Therefore, choices i and ii would be beneficial to workers, but choice iii would not be beneficial.

Using the Labor Market in the Stylized DSGE Model, from Workers