An increase in a worker's effective real income while unemployed, , will cause the worker's:
A)real wage offers to increase.
B)real wage offers to decrease.
C)real reservation wage to increase.
D)real reservation wage to decrease.

Question

An increase in a worker's effective real income while unemployed,  , will cause the worker's:
A)real wage offers to increase. 
B)real wage offers to decrease. 
C)real reservation wage to increase. 
D)real reservation wage to decrease.

Quizplus · Accepted Answer

When a worker's effective real income increases while unemployed, they may be less willing to accept a job offer that pays less than their new real income level. This can cause their reservation wage (the lowest wage they are willing to accept for a job) to increase, making them less likely to accept job offers with lower wages. Therefore, the correct answer is C, real reservation wage to increase.

An Increase in a Worker's Effective Real Income While Unemployed