2832EconomicsMedium
According to supply-side economists, as tax rates are reduced, labor supply should increase. This implies that?
Athere is no income effect when tax rates are changed
Bthere is no substitution effect when tax rates are changed
Cthe substitution effect of a wage change is greater than the income effect of a wage change
Dthe income effect of a wage change is greater than the substitution effect of a wage change.
Correct answer
C. the substitution effect of a wage change is greater than the income effect of a wage change
Explanation
The correct answer is the substitution effect of a wage change is greater than the income effect of a wage change.