The government is considering raising the tax rate on labor income and asks you to report on the supply-side effects of such an action. Use appropriate graphs and report directions of change, not exact magnitudes. What will happen to: i. The supply of labor The demand for labor and why? Equilibrium employment and why? ii. iii. iv. The equilibrium before-tax wage rate and why? The equilibrium after-tax wage and why? V. vi. Potential GDP?

The government is considering raising the tax rate on labor income and asks you to report on the supply-side effects of such an action. Use appropriate graphs and report directions of change, not exact magnitudes. What will happen to: i. The supply of labor The demand for labor and why? Equilibrium employment and why? ii. iii. iv. The equilibrium before-tax wage rate and why? The equilibrium after-tax wage and why? V. vi. Potential GDP?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 4TY

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3. The government is considering raising the tax rate on labor income. Explain the supply-side effects of such an action and use appropriate graphs to show the directions of change, not exact magnitudes. What will happen to a. The supply of labor and why? b. The demand for labor and why? c. Equilibrium employment and why? d. The equilibrium before-tax wage rate and why? e. The equilibrium after-tax wage rate and why? f. Potential GDP?
Which payroll tax is imposed on both the employee and the employer? O a. federal unemployment tax b. state unemployment tax O c. federal income tax Od. FICA tax
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ASAP
The government is considering raising the tax rate on labor income. Explain the supply-side effects of such an action and use appropriate graphs to show the directions of change, not exact magnitudes. What will happen to: The supply of labor and why? The demand for labor and why? Equilibrium employment and why? The equilibrium before-tax wage rate and why? The equilibrium after-tax wage rate and why? Potential GDP? Explain your response with specifics and provide examples.
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