Essay
Explain what will happen to the equilibrium real wage and quantity of labour for each of the following scenarios,and use a graph of the aggregate labour market to show the changes.
a. The government decreases income tax rates.
b. The skill level of workers increases.
c. A hurricane destroys a large portion of the capital stock.
d. Workers increase their preference of labour over leisure.
e. A technological change occurs that increases the productivity of all workers,and at the same time the government increases income tax rates.
f. The overall skill level of workers decreases,and at the same time household wealth increases.
Correct Answer:

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a. A decrease in income tax rates will i...View Answer
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