The Labor Supply Curve Starts to Bend Backward at the Point

question 141

Multiple Choice

The labor supply curve starts to bend backward at the point where

• A)the total utility of leisure exceeds the total disutility of labor.
• B)the marginal utility of additional income becomes zero.
• C)the income effect comes to dominate the substitution effect.
• D)the substitution effect comes to dominate the income effect.

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Definitions:

Classical Macroeconomic Theory

An economic theory that emphasizes the self-regulating nature of markets and the natural adjustments of markets to achieve full employment equilibrium.

Flexible Interest Rate

refers to an interest rate that can change over the term of a loan or deposit based on market conditions.

Credit Supplied

The total amount of credit available to borrowers from lenders within the market.

Aggregate Demand Curve

A graphical representation that shows the total amount of goods and services demanded at different price levels in an economy.