Policies Affecting Labor Supply

Steps:

• Identify labor supply as the total hours workers are willing to offer at various wages.
• Evaluate each policy's impact on workers' willingness or ability to work.
• Consider incentives: policies that encourage longer or more work increase supply.
• Select the policy that directly extends working years.

Why D is correct:

• Raising the retirement age extends the period people must or choose to work, directly increasing total labor supply per the labor market participation definition.

Why the others are wrong:

• A: Increasing unemployment benefits reduces work incentive, decreasing labor supply.
• B: Lowering interest rates stimulates investment and borrowing but does not directly affect labor supply.
• C: Raising income tax lowers net earnings, discouraging work and reducing labor supply.

Final answer: D