According to supply side economists as tax rates are... - Solved MCQs & Answer

4027EconomicsMedium

According to supply side economists as tax rates are reduced labour supply should increase. This implies that?

AThere is no income effect when tax rates are changed

BThe substitution effect of a wage change is greater than the income effect of a wage change

CThere is no substitution effect when tax rates are changed

DThe income effect of a wage change is greater than the substitution effect of a wage change.

Correct answer

B. 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.

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