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    Exam 5: A Closed-Economy One-Period Macroeconomic Model
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    If the Government Replaces a Lump Sum Tax with a Proportional
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If the Government Replaces a Lump Sum Tax with a Proportional

Question 36

Question 36

Multiple Choice

If the government replaces a lump sum tax with a proportional labor income tax,then


A) employment and output increase.
B) employment increases and output decreases.
C) employment decreases and output increases.
D) employment and output decrease.

Correct Answer:

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