Use the Following Figure to Answer the Question : Figure

question 64

Multiple Choice

Use the following figure to answer the question : Figure 17-1 : shows the weekly income (in dollars) and leisure (in hours) of a worker using an indifference curve and a budget line.

-Refer to Figure 17-1.If the number of leisure hours is OL₂ after a change in the wage rate,it implies that:

• A)the income effect of the wage change is greater than the substitution effect.
• B)the income effect of the wage change is less than the substitution effect.
• C)the income effect of the wage change exactly offsets the substitution effect.
• D)the income and substitution effects of a wage change operate in the same direction.

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Definitions:

Real GDP

The calculation of a nation's total economic production factoring in adjustments for price fluctuations, either inflationary or deflationary.

Growth Rate

The measure of the increase in a particular variable, such as GDP or population size, over a specific period of time, usually expressed as a percentage.

Nominal GDP

The gross domestic product measured in current market prices, without adjustment for inflation.

Real GDP

The total market value of all final goods and services produced in an economy in a year, adjusted for inflation, reflecting the actual economic output.