As a Person's Wage Rate Increases, the Substitution Effect Motivates

question 283

True/False

As a person's wage rate increases, the substitution effect motivates an increase in work and the income effect motivates a decrease in work.

---

Definitions:

Bonds

Fixed-income investment products representing a loan made by an investor to a borrower, typically corporate or governmental.

Preferred Shares

A class of ownership in a corporation that has a higher claim on assets and earnings than common shares, usually with fixed dividends.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements and is used to evaluate the cost of funding projects via equity financing.

Dividend

A disbursement by a company to its shareholders, often from its profit reserves.