If the income taxes on wages increase, the labor supply curve will shift left, but what happens to the unemployment rate?
A) It unambiguously falls because the labor participation rate changes.
B) It unambiguously falls because some workers drop out of the workforce.
C) It unambiguously rises because some workers drop out of the workforce.
D) It is ambiguous because some workers drop out of the workforce.
E) None of these answers is correct.
Correct Answer:
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