For the Past Year, Teddy Has Had a Part-Time Job

question 143

Multiple Choice

For the past year, Teddy has had a part-time job at which he is willing to work 10 hours each week. During Teddy's annual review, his boss grants him an 8 percent increase in his wage. As a result of the wage increase, Teddy is now willing to work 15 hours each week. Teddy's opportunity cost of ________ has risen and because for Teddy the substitution effect of the wage hike is ________ than the income effect.

• A) work; greater
• B) work; less
• C) leisure; greater
• D) leisure; less

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Definitions:

Reserve Ratio

The fraction of depositors' balances that banks must have on hand as cash, a regulation set by central banks to ensure liquidity.

Vault Cash

The physical currency that a bank holds in its vault and automatic teller machines (ATMs) as a part of its reserves.

Required Reserve Ratio

The fraction of deposits that regulators require a bank to hold in reserve and not lend out.

Reserves

Funds or material set aside or saved for future use, often used in the context of central banking as currency holdings or commodities like gold.