Having a higher minimum wage can lead to more disposable income and greater consumer spending. This is most likely to increase which of the following?

Having a higher minimum wage can lead to more disposable income and greater consumer spending. This is most likely to increase which of the following?

• A. Greater price inflation
• B. Higher wages for workers in other sectors
• C. More demand for goods and services
• D. Lower sales for the business

Answer: (C)

When people have more disposable income, they spend more. A higher minimum wage boosts take‑home pay for low‑paid workers, so their spending on goods and services rises. This extra spending increases overall demand in the economy because consumer spending is a big part of demand. So the most likely change is a rise in demand for goods and services as households buy more with their extra money. Inflation could follow if prices rise to match higher demand, but the direct, immediate effect of more disposable income is greater demand. It doesn’t automatically cause higher wages in other sectors, and it wouldn’t lead to lower sales.

When people have more disposable income, they spend more. A higher minimum wage boosts take‑home pay for low‑paid workers, so their spending on goods and services rises. This extra spending increases overall demand in the economy because consumer spending is a big part of demand. So the most likely change is a rise in demand for goods and services as households buy more with their extra money. Inflation could follow if prices rise to match higher demand, but the direct, immediate effect of more disposable income is greater demand. It doesn’t automatically cause higher wages in other sectors, and it wouldn’t lead to lower sales.