In the current period a perceived increase in the real wage, will cause households to:
A)work less.
B)consume fewer goods.
C)consume less leisure.
D)all of the above.

Question

Quizplus · Accepted Answer

An increase in real wage will increase the opportunity cost of leisure, making it relatively more expensive. Therefore, households are more likely to consume less leisure and to work more to increase income. Since households are working more, they will have more income to spend on consumption which could lead to an increase in consumption of goods. However, this is not guaranteed as households may choose to save more of their income or purchase luxury goods instead of increasing their consumption of necessities. Thus, the correct choice is C - consume less leisure.

In the Current Period a Perceived Increase in the Real