If the Wage Rate Falls, Consumption

question 45

Multiple Choice

If the wage rate falls, consumption

• A) rises because the income and substitution effects are working in opposite directions to change consumption.
• B) falls because the income and substitution effects are both working in the same direction to decrease consumption.
• C) rises because the income and substitution effects are both working in the same direction to increase consumption.
• D) falls because the income and substitution effects are working in opposite directions to change consumption.

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U-Shaped Curve

A graphical representation showing a relationship where both low and high values of a variable are associated with high values of another.

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