Question 1
If a policy maker wants to change taxes to encourage individuals to increase their labor supply, the policy maker should
◦ reduce taxes by a lump-sum amount.
◦ increase taxes by a lump sum.
◦ reduce the income tax rates that individuals pay.
◦ increase the income tax rates that individuals pay.
Question 2
Which of the following is
not a transfer payment?
◦ Social Security payments
◦ welfare benefits
◦ unemployment compensation
◦ dividends