When households consume more leisure time as a results of a transfer program,they reduce their labor supply,and the transfer is said to __________.Theoretically this decrease in labor supply could cause wages to ___________.
A) Crowd out labor income; decrease
B) Crowd out non-labor income; increase
C) Crowd out labor income; increase
D) Crowd out non-labor increase; decrease

Question

Quizplus · Accepted Answer

When households consume more leisure time, it means they are reducing their labor supply. This can cause a reduction in the overall labor supply, leading to an increase in wages due to the law of supply and demand. Therefore, the transfer program will crowd out labor income while increasing wages, making option C the correct answer.

When Households Consume More Leisure Time as a Results of a Transfer