suppose that

Suppose that the representative consumer faces a labor income tax with a standard deduction. That is, the representative consumer pays no tax on wage income for the rst x units of real wage income, and then pays a proportional mx t on each unit of real wage income greater than x. Now suppose that the government increases the tax deduction x from x1 to x2. Assume that the representative consumer pays positive amounts of labor income tax before and after the change. For consumption. the substitution effect is . the income effect is , and the total effect is O A. positive; negative; ambiguous O B. none; positive: positive 0 c. positive; negative; positive 0 D. none; negative; negative 0 E. None of the above