Question 1:

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.