If the Wage Rate Falls, Consumption

question 45

Multiple Choice

If the wage rate falls, consumption

• A) rises because the income and substitution effects are working in opposite directions to change consumption.
• B) falls because the income and substitution effects are both working in the same direction to decrease consumption.
• C) rises because the income and substitution effects are both working in the same direction to increase consumption.
• D) falls because the income and substitution effects are working in opposite directions to change consumption.

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Definitions:

Subject Complement

A word or phrase that follows a linking verb and describes or identifies the subject of a sentence.

Complements

Elements that complete or bring to perfection; in grammar, words or groups of words that complete the meaning of a predicate.

Obverse

The front or main view of an object such as a coin, or in logic, it refers to a proposition that is the affirmative counterpart to a negative statement.

Proposition

An assertion or declaration that demonstrates a viewpoint or judgment, and has the potential to be true or false.