With an increase in government purchases financed by an increase in the marginal tax rate on labor income, the change in labor supply depends on whether the:
a. negative substitution effect is bigger than the positive income effect.
b. positive substitution effect is bigger than the negative income effect.
c. negative substitution effect is bigger than the negative income effect.
d. positive substitution effect is bigger than the positive income effect.
Answer: a. negative substitution effect is bigger than the positive income effect.
Economics
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a. true b. false
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