Answer to Question #90134 in Finance for lungile

Question

Suppose that a proposal for tax reductions associated with the purchase of capital is up for debate. Suppose too that union leaders are called upon to comment on the proposal from the perspective of how it will affect the welfare of their members as workers (not consumers). Will they all agree on the effects of the proposal? Explain your answer

Answer 1

A proposal for tax reductions associated with the purchase of capital will decrease demand for labour, so the both equilibrium wage rate and number of workers hired will decrease. That's why they all will not agree on the effects of the proposal.