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Q. |
Why does a temporary decrease in government purchases decrease labour supply in the classical model? |
A. | people prefer to work less when government is doing less for them. |
B. | decreased government purchases make people worse off, so they work less hours. |
C. | the decrease in current or future taxes needed to pay for the decrease in government purchases increases people wealth |
D. | the fall in government spending decreases labour demand, decreasing the real wage, and sopeople decreases their labour supply. |
Answer» C. the decrease in current or future taxes needed to pay for the decrease in government purchases increases people wealth |
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