Suppose that the government imposes a proportional income tax on the consumer's wage income, i.e. w * (1-t)*(h-l). What is the effect of an increase in tax rate on consumption and leisure (assuming that the substitution effect outweighs the income effect)?

Normale Antwort Multiple Choice

• Consumption increases and leisure increases

  Consumption increases and leisure increases

  Consumption increases and leisure increases
• Consumption increases and leisure decreases

  Consumption increases and leisure decreases

  Consumption increases and leisure decreases
• Consumption decreases and leisure increases

  Consumption decreases and leisure increases

  Consumption decreases and leisure increases
• Consumption decreases and leisure decreases

  Consumption decreases and leisure decreases

  Consumption decreases and leisure decreases

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