Question 1
The nonlabor income of households will decrease, causing consumption to decrease and labor supply to increase, if the government
◦ increases the corporate profits tax.
◦ increases transfer payments.
◦ implements expansionary fiscal policy.
◦ decreases the personal income tax.
Question 2
The nonlabor income of households will increase, causing consumption to increase and labor supply to decrease, if the government
◦ decreases the corporate profits tax.
◦ decreases transfer payments.
◦ implements contractionary fiscal policy.
◦ increases the personal income tax.