Suppose that in response to a decrease in real interest rates, a person decides to reduce his supply of labour today and increase it in the future. This behaviour is most consistent with the
A)new classical cycle theory.
B)Keynesian cycle theory.
C)new Keynesian cycle theory.
D)real business cycle theory.
E)monetarist cycle theory.

Question

Quizplus · Accepted Answer

Real business cycle theory suggests that individuals make labor supply decisions based on intertemporal substitution, responding to changes in real interest rates by adjusting labor supply over time.

Suppose That in Response to a Decrease in Real Interest