Because of intertemporal substitution,the supply of labor is likely to:
A) decrease when the economy grows more rapidly.
B) increase when the economy grows more rapidly.
C) remain constant regardless of how fast the economy grows.
D) become unpredictable when a shock occurs in an economy.

Question

Quizplus · Accepted Answer

Intertemporal substitution suggests that as the economy grows more rapidly, wages tend to increase, which incentivizes individuals to work more (substitute leisure time for work) to take advantage of higher current earnings. This leads to an increase in the supply of labor.

Because of Intertemporal Substitution,the Supply of Labor Is Likely To