The quantity of labor supplied depends on the

Question

Quizplus · Accepted Answer

According to the standard model of labor supply, the quantity of labor supplied is positively related to the real wage rate, which is the wage rate adjusted for inflation or the purchasing power of the wage. This means that as the real wage increases, workers will supply more labor because the value of their earnings has increased. The money wage rate, or nominal wage, is the wage rate in current dollar terms and does not necessarily reflect the purchasing power of the wage. Therefore, choice B is incorrect. The price of output and the level of profits may affect the demand for labor but not the supply of labor. Therefore, choices C and D are also incorrect.

The Quantity of Labor Supplied Depends on the