The "macroeconomics" rebuttal to the traditional analysis of the minimum wage argues that
A)the rich consume less than the poor out of extra income, therefore an increase in the minimum wage increases aggregate demand.
B)the rich consume more than the poor out of extra income, therefore an increase in the minimum wage increases aggregate demand.
C)people work harder when they feel they are inadequately compensated, therefore an increase in the minimum wage may actually lower productivity.
D)in the short run the demand elasticity of labor is such that businesses will actually increase the number of workers hired when the minimum wage increases.

Question

Quizplus · Accepted Answer

The macroeconomic rebuttal to the traditional analysis of the minimum wage argues that an increase in the minimum wage increases aggregate demand because low-wage workers are more likely to spend any extra income they receive, which spurs consumption and economic growth. This is known as the "Keynesian" argument. The other answer choices are not accurate representations of the macroeconomic rebuttal.

The "Macroeconomics" Rebuttal to the Traditional Analysis of the Minimum