Contemporary Labor Economics 9th Edition by Campbell Mcconnell, Stanley Brue, David Macpherson, Robert Powell, David Colander

Exercise 1

The "supply-side" economics of the Reagan administration (1981 1988) presumed that income tax cuts would stimulate incentives to work and thereby increase eco­nomic growth. Demonstrate this outcome with a work leisure diagram. What does this outcome assume about the relative sizes of the income and substitution effects Explain: "The predicted increase in work incentives associated with supply-side tax cuts might in fact be more relevant for women than for men."