When drawn against the real interest rate,the output supply curve is upward sloping because labour supply is
A) increasing the real interest rate and labour demand is independent of the real interest rate.
B) decreasing the real interest rate and labour demand is independent of the real interest rate.
C) independent of the real interest rate and labour demand is increasing the real interest rate.
D) independent of the real interest rate and labour demand is decreasing the real interest rate.
E) increasing as the wage rate rises.

Question

Quizplus · Accepted Answer

An increase in the real interest rate increases the opportunity cost of leisure, so workers perceive work as being relatively more attractive. As a result, they may supply more labour, leading to an upward sloping output supply curve. The labour demand curve is independent of the real interest rate in this case.

When Drawn Against the Real Interest Rate,the Output Supply Curve