Which Statement Is TRUE

question 76

Multiple Choice

Which statement is TRUE?

• A) The income effect of a wage increase is to consume less leisure.
• B) The substitution effect of a wage decrease is to consume less leisure.
• C) The price of leisure decreases with a decrease in wages.
• D) The price of leisure increases with an increase in income.

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Definitions:

Discount Rate

Utilized in discounted cash flow analysis, this rate assists in calculating the present worth of forthcoming cash flows.

Net Present Value

A calculation that compares the value of all cash inflows and outflows of a project or investment using a discount rate to present day.

Internal Rate

Often shorthand for Internal Rate of Return (IRR), this is a metric used in financial analysis to estimate the profitability of potential investments.

Crossover Point

Crossover Point refers to the level of activity or the time at which two options have the same cost or benefit, making them indifferent choices.