Questions Are Based on the Following Diagram, Which Shows a Labor

question 49

Multiple Choice

Questions are based on the following diagram, which shows a labor supply curve for an individual.






-If the wage rises from W₁ to W₂ we may conclude that:

• A)the income effect is stronger than the substitution effect
• B)the income effect and substitution effects are equal
• C)the substitution effect is stronger than the income effect
• D)labor supply is perfectly inelastic

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Definitions:

Effective Rate

The actual interest rate that borrowers pay or investors receive on a financial product, once all the compounding periods are factored in, often higher than the nominal rate.

Compounding Interval

The frequency at which interest is applied to the principal sum of a loan or deposit, affecting the total interest earned or paid.

Compounded Nominal Rate

The rate of interest quoted for a period, usually a year, without taking into account the effect of compounding within that period.

Effective Rate

The actual interest rate of an investment or loan, taking into account the effect of compounding interest as opposed to the nominal or stated rate.