Suppose That an Individual Has Chosen Not to Work

question 24

Multiple Choice

Suppose that an individual has chosen not to work.Then a change in the wage rate:

• A) creates a substitution effect, but no income effect.
• B) creates an income effect, but no substitution effect.
• C) creates both and income and substitution effect.
• D) creates neither an income effect nor a substitution effect.

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Definitions:

Stock Price

Stock price is the current market price of a share of stock, reflecting the value the market places on a company.

Book Value

The net value of a company's assets found on its balance sheet, and calculated as total assets minus intangible assets and liabilities.

Equity Multiplier

A financial ratio indicating the portion of a company's assets that are financed by stockholder's equity.

Total Debt

The sum of all short-term and long-term liabilities that a company owes, indicating the total amount of borrowed funds.