What happens to the labor demand schedule

Reference no: EM132118788

Question: A decline in the labor income tax rate: Suppose there is a temporary decline in the tax rate that households pay on their labor income. Analyze the effect

of this shock in the labor market diagram of a standard DSGE model (with no sticky prices or wages).

(a) What happens to the labor demand schedule?

(b) What happens to the labor supply schedule?

Reference no: EM132118788

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