If Leisure Is a Normal Good, Then the Income Effect

question 26

Multiple Choice

If leisure is a normal good, then the income effect of a decrease in wage will:

• A) decrease the number of hours worked.
• B) increase the number of hours worked.
• C) decrease the number of leisure hours.
• D) increase the sum of leisure plus hours worked.

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Definitions:

Noninterest-Bearing Notes

These are promissory notes issued at a discount to face value that do not pay periodic interest, with the return to the investor being the difference between the purchase price and the face value at maturity.

Discounted Note

A promissory note whose face value has been reduced to reflect the effect of interest that it will earn.

GAAP

Generally Accepted Accounting Principles, which are a set of accounting standards and practices used to prepare financial statements.