A study by Edward Prescott found that the ________ marginal tax rates in the United States relative to Europe resulted in a ________ quantity of labor supplied in the United States.
A) higher; smaller B) lower; smaller C) lower; larger D) higher; larger
Question 2
If tax reduction and simplification are effective, then
A) fewer new firms will be established, since existing firms will make more profit.
B) saving and investment in new capital will increase.
C) interest rates will rise in financial markets and demand for financial assets falls.
D) real wages will rise as labor supply and demand increase.
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