ECON 352 CH 3

Suppose the economy's production function is Y = AK^0.3N^0.7. When K = 1000, N = 50, and A = 15, what is Y? A) 1842 B) 6106 C) 750,000 D) 123

A) 1842

According to Okun's law, if output grew 7% and full-employment output rose 5%, what would be the change in the unemployment rate? A) -4 percentage points B) -1 percentage point C) 1 percentage point D) 4 percentage points

B) -1 percentage point

Suppose the economy's production function is Y = AK^0.3N^0.7. Suppose K = 200, N = 2000, and A = 1. Calculate the marginal product of capital. A) 1.0 B) 1.5 C) 2.0 D) 2.5

B) 1.5

Suppose the marginal product of labor is MPN = 200 - 0.5N where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. What is the equilibrium real wage? A) 5 B) 10 C) 15 D) 20

B) 10

An adverse oil-price shock reduces labor demand. What happens to current employment and the real wage rate? A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase.

B) Both employment and the real wage rate would decrease.

What two factors should you equate in deciding how many workers to employ? A) The marginal product of labor and the marginal product of capital B) The marginal product of labor and the real wage rate C) The marginal product of labor and the real interest rate D) The marginal product of capital and the real wage rate

B) The marginal product of labor and the real wage rate

If Jeff's wage rate rises, he decides to work more hours. From this, we can infer that A) for Jeff, the substitution effect is greater than the income effect. B) for Jeff, the substitution effect is equal to the income effect. C) for Jeff, the substitution effect is less than the income effect. D) Jeff is confused.

A) for Jeff, the substitution effect is greater than the income effect.

An adverse supply shock, such as a reduced supply of raw materials, would A) increase the marginal product of labor. B) decrease the marginal product of labor. C) decrease the marginal product of capital, but have no effect on the marginal product of labor. D) not affect the marginal product of labor.

B) decrease the marginal product of labor.

An adverse supply shock would A) shift the production function up and decrease marginal products at every level of employment. B) shift the production function down and decrease marginal products at every level of employment. C) shift the production function down and increase marginal products at every level of employment. D) shift the production function up and increase marginal products at every level of employment.

B) shift the production function down and decrease marginal products at every level of employment.

If the marginal product of capital doesn't change as the amount of capital increases, a figure showing the relationship between output and capital A) is a straight line with constant upward slope. B) is a straight line with a slope of zero. C) is a vertical line. D) slopes upward with a slope that declines as the amount of capital increases.

A) is a straight line with constant upward slope.

A technological breakthrough in using photons for computers will increase the productivity of those working with computers a hundredfold. You would expect this breakthrough to shift the A) marginal product of labor curve up and to the right, raising the quantity of labor demanded at any given real wage. B) marginal product of labor curve down and to the left, reducing the quantity of labor demanded at any given real wage. C) labor supply curve up, reducing the quantity of labor demanded at any given real wage. D) labor supply curve down, raising the quantity of labor demanded at any given real wage.

A) marginal product of labor curve up and to the right, raising the quantity of labor demanded at any given real wage.

A decrease in the real wage would result in a A) movement along the labor demand curve, causing an increase in the number of workers hired by the firm. B) shift of the labor demand curve, causing an increase in the number of workers hired by the firm. C) movement along the labor demand curve, causing a decrease in the number of workers hired by the firm. D) shift of the labor demand curve, causing a decrease in the number of workers hired by the firm.

A) movement along the labor demand curve, causing an increase in the number of workers hired by the firm.

In the production function Y = AF(K, N), A is ________, K is ________, and N is ________. A) total factor productivity; the capital stock; the number of workers employed B) total factor productivity; investment; the number of workers employed C) the productivity of labor; the capital stock; the size of the labor force D) the productivity of labor; investment; the size of the labor force

A) total factor productivity; the capital stock; the number of workers employed

Assume that the full-employment level of output is $5000 billion and the natural unemployment rate is 5%. Suppose the current unemployment rate is 8%. What would be the current level of output according to Okun's law (when the Okun's law coefficient is 2)? A) $4500 billion B) $4700 billion C) $4900 billion D) $5000 billion

B) $4700 billion

How many people are unemployed if the employment ratio is 75%, there are 90 million people employed, and there are 20 million people not in the labor force? A) 20 million B) 10 million C) 5 million D) 0 million

B) 10 million

Suppose the marginal product of labor is MPN = 200 - 0.5N where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. If a supply shock increases the marginal product of labor by 10 (to MPN = 210 - 0.5 N), by how much does the real wage increase? A) 1 B) 2 C) 3 D) 4

B) 2

The Upstart Company has the following production function. If the company hires 4 workers, which of the following could be the real wage rate? A) 2 B) 4 C) 6 D) 8

B) 4

In the production function Y = AF(K, N), total factor productivity is A) Y/A. B) A. C) K/N. D) Y/N.

B) A.

The ________ is the number of unemployed divided by the labor force and the ________ is the number of employed divided by the adult population. A) unemployment rate; employment rate B) unemployment rate; employment ratio C) unemployment ratio; participation rate D) discouraged worker ratio; employment rate

B) unemployment rate; employment ratio

Full-employment output is the level of output that firms in the economy supply when A) taxes are zero. B) wages and prices have fully adjusted. C) the unemployment rate is zero. D) all capital is fully utilized.

B) wages and prices have fully adjusted.

If Y = A × N × (75 + K/N), where K = 1000, N = 20, and A = 10, what happens if K doubles and N doubles? A) Y is unchanged. B) Y increases by 50%. C) Y doubles. D) Y quadruples.

C) Y doubles.

As a result of the superb economics essay that you wrote during this quarter, you won the Adam Smith prize of $100. The receipt of these funds would be an example of A) the substitution effect being stronger than the income effect. B) the income effect being stronger than the substitution effect. C) a pure income effect. D) a pure substitution effect.

C) a pure income effect.

A decrease in the number of workers hired by a firm could result from A) an increase in the marginal product of labor. B) an increase in the marginal revenue product of labor. C) an increase in the real wage. D) a decrease in the real wage.

C) an increase in the real wage.

If Jeff's wage rate rises, he decides to work fewer hours. From this, we can infer that A) for Jeff, the substitution effect is greater than the income effect. B) for Jeff, the substitution effect is equal to the income effect. C) for Jeff, the substitution effect is less than the income effect. D) Jeff is a nitwit.

C) for Jeff, the substitution effect is less than the income effect.

The type of unemployment for which the net economic costs are most likely to be small is A) cyclical unemployment. B) chronic unemployment. C) frictional unemployment. D) structural unemployment.

C) frictional unemployment.

The two main characteristics of the production function are A) it slopes downward from left to right, and the slope becomes flatter as the input increases. B) it slopes upward from left to right, and the slope becomes steeper as the input increases. C) it slopes upward from left to right, and the slope becomes flatter as the input increases. D) it slopes downward from left to right, and the slope becomes steeper as the input increases.

C) it slopes upward from left to right, and the slope becomes flatter as the input increases.

An increase in the real wage would result in a A) movement along the labor demand curve, causing an increase in the number of workers hired by the firm. B) shift of the labor demand curve, causing an increase in the number of workers hired by the firm. C) movement along the labor demand curve, causing a decrease in the number of workers hired by the firm. D) shift of the labor demand curve, causing a decrease in the number of workers hired by the firm.

C) movement along the labor demand curve, causing a decrease in the number of workers hired by the firm.

A mathematical expression relating the amount of output produced to quantities of capital and labor utilized is the A) real interest rate. B) productivity relation. C) production function. D) marginal product.

C) production function.

A tremendous flood along the Mississippi River destroys thousands of factories, reducing the nation's capital stock by 5%. What happens to current employment and the real wage rate? A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase.

B) Both employment and the real wage rate would decrease.

Changes in the capital stock occur ________, and changes in the amount of labor that firms employ occur ________. A) quickly; quickly B) slowly; slowly C) slowly; quickly D) quickly; slowly

C) slowly; quickly

A person is more likely to increase labor supply in response to an increase in the real wage, the ________ is the income effect and the ________ is the substitution effect. A) larger; larger B) larger; smaller C) smaller; larger D) smaller; smaller

C) smaller; larger

Because of diminishing marginal productivity A) the labor supply curve is not vertical. B) nominal wages are sticky in a downward direction. C) the labor demand curve is negatively sloped. D) households save only a small share of their income.

C) the labor demand curve is negatively sloped.

The fact that the production function relating output to labor becomes flatter as we move from left to right means that A) the marginal product of labor is positive. B) the marginal product of capital is positive. C) there is diminishing marginal productivity of labor. D) there is diminishing marginal productivity of capital.

C) there is diminishing marginal productivity of labor.

The ________ is the number of unemployed divided by the labor force and the ________ is the labor force divided by the adult population. A) unemployment rate; employment rate B) unemployment rate; employment ratio C) unemployment ratio; participation rate D) discouraged worker ratio; employment rate

C) unemployment ratio; participation rate

Frictional unemployment arises when A) unskilled or low-skilled workers find it difficult to obtain desirable, long-term jobs. B) labor must be reallocated from industries that are shrinking to areas that are growing. C) workers must search for suitable jobs and firms must search for suitable workers. D) output and employment are below full-employment levels.

C) workers must search for suitable jobs and firms must search for suitable workers.

An increase in the number of workers hired by a firm could result from A) a decrease in the marginal product of labor. B) a decrease in the marginal revenue product of labor. C) an increase in the real wage. D) a decrease in the real wage.

D) a decrease in the real wage.

According to Okun's law, an increase in the unemployment rate will cause ________ in the level of employment and ________ in the level of output. A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease

D) a decrease; a decrease

An increase in the real wage rate will cause A) the labor demand curve to shift to the right. B) the labor demand curve to shift to the left. C) the quantity of labor demanded to rise. D) a movement along the labor demand curve.

D) a movement along the labor demand curve.

An invention that speeds up the Internet is an example of A) an income effect. B) an increase in labor. C) a substitution effect. D) a supply shock.

D) a supply shock.

Cyclical unemployment is caused by A) people entering the labor force to search for jobs. B) technological progress, which causes some industries to expand employment and others to reduce employment. C) reducing international trade barriers, which causes some industries to expand employment and others to reduce employment. D) business cycle fluctuations.

D) business cycle fluctuations.

The marginal product of labor A) is measured by the slope of the production function relating capital to employment. B) is larger when the labor supply is relatively larger. C) is smaller when the labor supply is relatively smaller. D) decreases as the number of workers already employed increases.

D) decreases as the number of workers already employed increases.

The equilibrium level of employment, achieved after the complete adjustment of wages and prices, is known as the A) zero-unemployment level of employment. B) natural state. C) invisible handshake. D) full-employment level of employment.

D) full-employment level of employment.

According to Okun's law, if output grew 1% and full-employment output rose 3%, what would be the change in the unemployment rate? A) -2 percentage points B) -1 percentage point C) 1 percentage point D) 2 percentage points

C) 1 percentage point

What is the unemployment rate if there are 170 million people employed, 25 million people unemployed, and 35 million not in the labor force? A) 14.7% B) 13.7% C) 12.8% D) 10.9%

C) 12.8%

Firms hire labor at the point where the A) nominal wage rate equals the marginal product of labor. B) real wage rate equals the marginal revenue product of labor. C) nominal wage rate equals the marginal revenue product of labor. D) real wage rate equals the marginal revenue product of capital.

C) nominal wage rate equals the marginal revenue product of labor.

The fact that the production function relating output to capital becomes flatter as we move from left to right means that A) the marginal product of labor is positive. B) the marginal product of capital is positive. C) there is diminishing marginal productivity of labor. D) there is diminishing marginal productivity of capital.

D) there is diminishing marginal productivity of capital.

The labor force participation rate is the percentage of the adult population that is A) employed. B) willing to work but unable to find jobs. C) unemployed. D) working or actively looking for work.

D) working or actively looking for work.

Suppose the production function is Y = A . Suppose in 2000, K = 1000, N = 100, and Y = 199.5. In 2010, capital, labor, and output have doubled, so K = 2000, N = 200, and Y = 399. (a) By what percentage did productivity grow from 2000 to 2010? (b) If output had risen to 798 instead of 399, and capital and labor doubled, by what percentage would productivity have grown from 2000 to 2010? Answer: (a) From the production function, you can calculate that A = 1 in both 2000 and 2010, so A is unchanged. (b) Since output doubles (relative to the case in which Y = 399 in 2010) with the same amounts of capital and labor, A doubled.

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In each of the following scenarios, state whether the labor supply curve would shift to the left, to the right, not shift at all, or if the shift is ambiguous because there is more than one effect and they would move the curve in opposite directions. (a) The stock market rises sharply. (b) Fewer teenagers work while in school than before. (c) A large fraction of the population flees the country because of a bird flu epidemic. (d) The expected future wage declines and the stock market crashes. (e) The current real wage rate rises.

(a) Higher wealth shifts the labor supply curve left. (b) Lower participation rate shifts the labor supply curve left. (c) Smaller working-age population shifts the labor supply curve left. (d) The lower future wage shifts the labor supply curve to the right and the stock market crash reduces wealth, also causing the labor supply curve to shift to the right. (e) No effect; just a movement along the curve.

Suppose a firm's hourly marginal product of labor is given by MPN = A (200 - N). (a) If A = 0.2 and the real wage rate is $10 per hour, how much labor will the firm want to hire? (b) Suppose the real wage rate rises to $20 per hour. How much labor will the firm want to hire? (c) With the real wage rate at $10 per hour, how much labor will the firm want to hire if A rises to 0.5?

(a) The firm will hire labor such that w = MPN, or 10 = 0.2(200 - N), so N = 150. (b) Now 20 = 0.2(200 - N), so N = 100. The firm's labor demand falls when the wage rate rises. (c) Now 10 = 0.5(200 - N), so N = 180. The increase in productivity increases labor demand

How would each of the following events affect Cheryl Shirker's supply of labor? (a) Cheryl's firm announces a reorganization plan, in which she will get a big promotion and raise in six months. (b) Cheryl's speculative investment in plutonium futures pays off big, netting her a profit of $300 thousand. (c) Cheryl's father, who had planned to leave her a large bequest, must spend all his wealth on medical bills after a prolonged illness.

(a) The higher future real wage reduces current labor supply. (b) Higher wealth reduces labor supply. (c) Lower wealth increases labor supply.

The table below represents Freedonia's macroeconomic data for Year 1 and Year 2. Suppose that the production function is given by Y = AK^0.3N^0.7. Between Year 1 and Year 2, total factor productivity of Freedonia's economy increased by A) -1.5%. B) 5.0%. C) 5.5%. D) 12.7%.

A) -1.5%.

What is the unemployment rate if there are 150 million people employed, 25 million people unemployed, and 25 million not in the labor force? A) 14.3% B) 13.4% C) 12.5% D) 25.0%

A) 14.3%

The city of Hope has a labor force of 1000. Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs. On January 1, May 1, and September 1 of each year, 50 people lose their jobs for a period of four months before finding new jobs. What is the average duration of an unemployment spell? A) 2.15 months B) 2.85 months C) 3.14 months D) 3.43 months

A) 2.15 months

What is the participation rate if there are 125 million people in the labor force, 100 million people employed, and 25 million not in the labor force? A) 83% B) 80% C) 75% D) 67%

A) 83%

A supply shock that reduces total factor productivity directly affects which term in the production function Y = AF(K, N)? A) A B) F C) K D) N

A) A

A beneficial oil-price shock increases labor demand. What happens to current employment and the real wage rate? A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase.

A) Both employment and the real wage rate would increase.

A winter ice storm has paralyzed the entire east coast, reducing productivity sharply. This supply shock shifts the marginal product of labor curve A) up and to the right, raising the quantity of labor demanded at any given real wage. B) down and to the left, reducing the quantity of labor demanded at any given real wage. C) up and to the right, reducing the quantity of labor demanded at any given real wage. D) down and to the left, raising the quantity of labor demanded at any given real wage.

B) down and to the left, reducing the quantity of labor demanded at any given real wage.

Economists often treat the economy's capital stock as fixed because A) labor is a more important factor of production than capital, so economists ignore capital. B) it takes a long time for new investment and the scrapping of old capital to affect the overall quantity of capital. C) there is very little capital in the economy compared with the amount of labor. D) unless the interest rate changes, the capital stock doesn't change

B) it takes a long time for new investment and the scrapping of old capital to affect the overall quantity of capital.

Research on labor supply generally shows that A) labor supply rises in response to a permanent increase in the real wage, but falls in response to a temporary increase in the real wage. B) labor supply rises in response to a temporary increase in the real wage, but falls in response to a permanent increase in the real wage. C) labor supply rises in response to both a temporary and a permanent increase in the real wage. D) labor supply falls in response to both a temporary and a permanent increase in the real wage.

B) labor supply rises in response to a temporary increase in the real wage, but falls in response to a permanent increase in the real wage.

A permanent increase in the real wage rate has a ________ income effect on labor supply than a temporary increase in the real wage, so labor supply is ________ with a permanent wage increase than for a temporary wage increase. A) larger; more B) larger; less C) smaller; more D) smaller; less

B) larger; less

The marginal product of capital is the increase in A) capital needed to produce one more unit of output. B) output from a one-unit increase in capital. C) labor needed to accompany a one-unit increase in capital. D) output from a one-dollar increase in capital.

B) output from a one-unit increase in capital.

Suppose the marginal product of labor is MPN = 200 - 0.5N where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. What is the equilibrium quantity of employment? A) 12 B) 190 C) 380 D) 760

C) 380

Zowie! Surfboards has the following production function. If surfboards sell for $30 and the nominal wage rate is $200, how many workers should the firm employ? A) 2 B) 3 C) 4 D) 5

C) 4

How many people are employed if the labor force participation rate is 60%, there are 3 million people unemployed, and there are 30 million people not in the labor force? A) 54 million B) 48 million C) 42 million D) 30 million

C) 42 million

Which of the following events would lead to an increase in the marginal product of labor for every quantity of labor? A) An increase in the real wage B) A decrease in the real wage C) A favorable supply shock such as a fall in the price of oil D) An adverse supply shock, such as a reduced supply of raw materials

C) A favorable supply shock such as a fall in the price of oil

The government announces a tax increase on workers' wages to take effect in the future. What happens to current employment and the real wage rate? A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase.

C) Employment would increase and the real wage would decrease.

According to Okun's Law, if the natural rate of unemployment is 5% and the actual unemployment rate is 4%, what is the level of full employment output if output equals $10,125 billion? A) $10,328 billion B) $10,226 billion C) $10,025 billion D) $9,926 billion

D) $9,926 billio

Suppose that Freedonia has GDP equal to 2000 million, the capital stock is 1700 million, and the number of employees equals 70 million. The production function is Y = A . Total factor productivity of the economy is approximately equal to A) 0.09. B) 2.61. C) 4.19. D) 12.87.

D) 12.87.

Suppose the marginal product of labor is MPN = 200 - 0.5N where N is aggregate employment. The aggregate quantity of labor supplied is 300 + 8w, where w is the real wage. If a supply shock increases the marginal product of labor by 10 (to MPN = 210 - 0.5 N), by how much does employment increase? A) 0 B) 4 C) 8 D) 16

D) 16

Suppose the economy's production function is Y = AK^0.3N^0.7. If K = 2000, N = 100, and A = 1, then Y = 246. If K and N both rise by 20%, and A is unchanged, by how much does Y increase? A) 5% B) 10% C) 15% D) 20%

D) 20%

Suppose the economy's production function is Y = AK^0.3N^0.7. If K = 2000, N = 100, and A = 1, then Y = 246. If K rises by 10%, and A and N are unchanged, by how much does Y increase? A) 30% B) 10% C) 6% D) 3%

D) 3%

The marginal product of labor (measured in units of output) for Expando Corp. is given by MPN = A(400 - N) where A measures productivity and N is the number of labor hours used in production. Suppose the price of output is $3 per unit and A = 2.0. What will be the demand for labor if the nominal wage is $18? A) 57 B) 107 C) 197 D) 397

D) 397

The Widget Company has the following production function. If widgets sell for $6 each and the wage rate is $33, how many workers will the company hire? A) 0 B) 1 C) 2 D) 4

D) 4

Assuming that the growth rate of full-employment output is 3%, and that the actual unemployment rate fell 2 percentage points in the last year, Okun's Law predicts that output growth rate over the past year was A) -1% B) 3% C) 5% D) 7%

D) 7%

The city of Hope has a labor force of 1000. Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs. On January 1, May 1, and September 1 of each year, 50 people lose their jobs for a period of four months before finding new jobs. What is the unemployment rate in any given month? A) 2% B) 3% C) 5% D) 7%

D) 7%

A bird flu epidemic causes many people to flee the country, but does not affect labor demand significantly because almost all the goods produced within the country are exported. What happens to current employment and the real wage rate? A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase.

D) Employment would decrease and the real wage would increase.

A sharp increase in stock prices makes people much wealthier. If the main effect of this increased wealth is felt on labor supply, what happens to current employment and the real wage rate? A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase.

D) Employment would decrease and the real wage would increase.

One reason that firms hire labor at the point where w = MPN is A) if w < MPN, the cost (w) of hiring additional workers exceeds the benefits (MPN) of hiring them, so they should hire fewer workers. B) if w > MPN, the cost (w) of hiring additional workers is less than the benefits (MPN) of hiring them, so they should hire more workers. C) if w < MPN, the cost (w) of hiring additional workers equals the benefits (MPN) of hiring them, so they have the right number of workers. D) if w > MPN, the cost (w) of hiring additional workers exceeds the benefits (MPN) of hiring them, so they should hire fewer workers.

D) if w > MPN, the cost (w) of hiring additional workers exceeds the benefits (MPN) of hiring them, so they should hire fewer workers.

Your boss wants to know if you should lay off any workers. You answer that you should lay off workers if the A) marginal revenue product of labor is greater than the nominal wage rate. B) marginal product of labor is greater than or equal to the real wage rate. C) marginal revenue product of labor is equal to the nominal wage rate. D) marginal product of labor is less than the real wage rate.

D) marginal product of labor is less than the real wage rate.

Cyclical unemployment arises when A) unskilled or low-skilled workers find it difficult to obtain desirable, long-term jobs. B) labor must be reallocated from industries that are shrinking to areas that are growing. C) workers must search for suitable jobs and firms must search for suitable workers. D) output and employment are below full-employment levels.

D) output and employment are below full-employment levels.

A favorable supply shock would A) shift the production function up and decrease marginal products at every level of employment. B) shift the production function down and decrease marginal products at every level of employment. C) shift the production function down and increase marginal products at every level of employment. D) shift the production function up and increase marginal products at every level of employment.

D) shift the production function up and increase marginal products at every level of employment.

The tendency of workers to supply more labor in response to a larger reward for working is called the ________ of a higher real wage on the quantity of labor supplied. A) homogeneous labor supply effect B) negative correlation effect C) income effect D) substitution effect

D) substitution effect

The Supply of Labor 1) The aggregate supply of labor is the A) total amount of time a person works over his or her lifetime. B) total amount of time a person spends in the labor force over his or her lifetime. C) unemployment rate. D) sum of the labor supplied by everyone in the economy.

D) sum of the labor supplied by everyone in the economy.

The income effect of a higher real wage on the quantity of labor supply is the A) idea that workers feel psychologically wealthier when wages are higher, so they work more. B) effect that income must rise when wages rise. C) tendency of workers to supply more labor in response to becoming wealthier. D) tendency of workers to supply less labor in response to becoming wealthier.

D) tendency of workers to supply less labor in response to becoming wealthier.