Question

When income taxes are lowered in a given economy, it causes the supply of labor curve to shift ___ which ___ the equilibrium quantity of labor employed. in terms of the production function (graphed with labor on the horizontal axis and real gdp on the vertical axis) this then causes ___ , which makes the lras curve shift ___ resulting in____.

a. rightward; raises; the production function to shift upward; rightward; economic growth
b. leftward; lowers; the production function to shift downward; leftward; a shrinking economy
c. rightward; raises; a movement up along a given production function; rightward; economic growth
d. rightward; raises; a movement down along a given production function; leftward; a shrinking economy

Answer 1

Lowered income taxes lead to a rightward shift in the labor supply curve, raising the equilibrium quantity of labor and moving the production function upward. This results in a rightward shift of the LRAS curve, indicating economic growth.

Step-by-step explanation:

When income taxes are lowered in a given economy, it causes the supply of labor curve to shift rightward, which raises the equilibrium quantity of labor employed. This adjustment results in a movement up along a given production function, which is graphed with labor on the horizontal axis and real GDP on the vertical axis. Consequently, this increases the output since more labor is contributing to production, thus making the long-run aggregate supply (LRAS) curve shift rightward, culminating in economic growth. Therefore, the correct option is: a. rightward; raises; the production function to shift upward; rightward; economic growth.

When income taxes are lowered in a given economy, it causes the supply of labor curve to shift rightward, which raises the equilibrium quantity of labor employed. In terms of the production function (graphed with labor on the horizontal axis and real GDP on the vertical axis), this then causes the production function to shift upward, resulting in economic growth.