If an Individual's Wage Increases,it Is Theoretically Ambiguous If the Individual

question 15

Multiple Choice

If an individual's wage increases,it is theoretically ambiguous if the individual will work more or less.Why?

• A) The wealth effect will decrease the number of hours worked,but no one knows the direction of the substitution effect.
• B) The wealth effect has an ambiguous effect on the number of hours worked,but the substitution effect will increase the number of hours worked.
• C) Both the wealth effect and substitution effect have an ambiguous effect on earnings.
• D) The wealth effect will increase the number of hours worked,but the
• Substitution effect will decrease the number of hours worked.
• E) The wealth effect will decrease the number of hours worked,but the
• Substitution effect will increase the number of hours worked.

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Definitions:

Aggregate Consumption

The total amount of goods and services consumed in an economy, often used to analyze economic health and growth.

Consumption Function

A concept in economics that calculates the expected total consumption of goods and services by individuals at different income levels.

Aggregate Income

The total amount of income generated by all individuals and entities in an economy over a specific period.

Aggregate Consumption

Aggregate consumption is the total amount of goods and services consumed in an economy, reflecting overall consumer spending.