Assume That the Income Effect Dominates the Substitution Effect

question 55

Multiple Choice

Assume that the income effect dominates the substitution effect. When workers experience a ________ price surprise, they ________ perceive that their real wage rate has ________, which leads them to work fewer hours.

• A) positive; correctly; risen
• B) negative; correctly; fallen
• C) negative; incorrectly; risen
• D) positive; incorrectly; risen

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Definitions:

Dissociation

A mental process of disconnecting from one’s thoughts, feelings, memories, or sense of identity.

Role-Playing

A method of learning or behavior change that involves acting out a role, possibly as oneself or as another person.

Divided-Consciousness

A theory suggesting that during hypnosis, the consciousness is split; one part responds to the hypnotist's suggestions, while another part, a "hidden observer", remains aware of reality.

Paradoxical Behavior

Actions that appear contradictory to the expected behavior or outcome.