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The Trump Administration introduced income tax cuts in the end of 2017. Graph the impact on...

The Trump Administration introduced income tax cuts in the end of 2017. Graph the impact on the equilibrium real wage rate and employment level, and explain your result.
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Answer #1

In the Graph shows the effect of income tax reduction in the labor market. The labor supply curve is positively sloping curve because of more salary more people are willing to work and vice versa. The labor demand curve is downward sloping because higher salary fewer people will be hired by the company. Here the initial equilibrium is A, and the Wages is S and the total quantity of labor will hired at Q. if the income tax reduction introduced by the government, then the total income of the people will increase. So the firm trying to lower the wages and hired more labors. So the labor supply curve will be shifted to the right. The new wage rate is S* and Quantity of labor firm will hire at Q*.

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