To determine: The reason for theory alone cannot predict how labour supply would be affected because of the implemented proposal.
The given proposal is that,
MR, presidential candidate in 2012 elections proposed extending the reduction in marginal income tax rates passed during BS presidential administration.
Explanation of Solution
When the marginal tax rate differs, it can have an impact on the net wages given to the individuals. As a consequences, this can lead to create income effect and substitution effects. These effects work in contrary manner till the leisure is considered as normal good. Hence, it is difficult to precisely conclude whether the labor supply decreases or increases.
When there is no hindrances in legal, political and investigational theory can be developed in which control group would face the situation and other experimental group handle the new
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