4) Any increase in the present value of taxes implies A) an increase in lifetime wealth...
4) Any increase in the present value of taxes implies
A) an increase in lifetime wealth and an increase in the current labor supply.
B) an increase in lifetime wealth and a decrease in the current labor supply.
C) a decrease in lifetime wealth and an increase in the current labor supply.
D) a decrease in lifetime wealth and a decrease in the current labor supply.
E) none of the above
Homework Answers
The correct choice is option C
When there is an increase in the tax rate, the disposable income is reduced, and this forces a worker to increase the number of hours he is willing to work to make up for the loss in income. but the lifetime income is reduced because the disposable income is now reduced.
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