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Macroeconomics

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Moderate

Increase in Wages

MACRO-6XSWPP

In a model where households face a labor-leisure decision (where leisure and consumption are both income normal goods), an increase in the real wage will cause the household to unambiguously

A

work more and consume more goods.

B

work less and consume more goods.

C

consume more goods, but it is unclear whether work will rise or fall.

D

work more and consume fewer goods.

E

work more and consume fewer goods.

F

consume fewer goods, but it is unclear whether work will rise or fall.

G

work more, but is it unclear whether consumption of goods will rise or fall.

H

work less, but is it unclear whether consumption of goods will rise or fall.