For a Typical Person Who Is Currently Earning a Low

question 164

Multiple Choice

For a typical person who is currently earning a low wage rate,the _____

• A)substitution effect of a wage increase is usually stronger than the income effect.
• B)substitution effect of a wage increase is usually weaker than the income effect.
• C)income effect of a wage increase usually is zero.
• D)substitution effect of a wage increase usually is zero.
• E)substitution and income effects of a wage increase tend to work in the same direction.

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Definitions:

Retained Earnings

The portion of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt.

Stock Split

A corporate action that increases the number of a corporation's outstanding shares by dividing each share, which typically reduces the share price.

Par Stock

A system that establishes a minimum level of inventory that must be on hand at all times to adequately serve customer needs.

Cumulative Preferred Stock

A type of preferred stock that entitles shareholders to receive dividends in arrears before any dividends can be distributed to common stockholders.