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Macroeconomics Problem 3: (20 points) The government is considering raising the tax rate on labor income and asks you to report on the supply-side effects

Macroeconomics

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Problem 3: (20 points) The government is considering raising the tax rate on labor income and asks you to report on the supply-side effects of such an action. Use appropriate graph and report directions of change, not exact magnitudes. What will happen to a. The supply of labor and why? b. The demand of labor and why? c. Equilibrium employment and why? d. The equilibrium before-tax wage rate and why? e. The equilibrium after-tax wage rate and why? f. Potential GDP

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