The aggregate supply of labour in the economy as a whole
1. is upward sloping at low real wage rates because
of the substitution effect of work for leisure as wages rise but negatively
sloped at high real wages due to the wealth effect of wage increases on the
demand for leisure.
2. is a relationship between the quantity of
employment offered and the nominal wage rate in the economy.
3. is positively sloped when the income effect of
wage increases predominates and negatively sloped when the substitution effect
predominates.
4. is accurately described by all of the above.
Choose the correct option.