As Wages Rise, If an Employee Works the Same Number

question 352

Multiple Choice

As wages rise, if an employee works the same number of hours as before, then the

• A) substitution effect dominates the income effect.
• B) substitution effect and the income effect are of equal magnitude.
• C) income effect dominates the substitution effect.
• D) employee's income will fall.

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Definitions:

Unsecured Credit

refers to credit extended without any collateral backing, based solely on the borrower's creditworthiness and promise to repay.

Foreclosure

The legal process by which a lender takes possession of a property used as collateral for a loan due to failure of the borrower to meet the repayment terms.

Deficiency

The shortfall amount between a debt owed and the proceeds from the sale of assets pledged to secure the debt.

Surplus

The amount of an asset or resource that exceeds the portion that is utilized.