According to real business cycle theory, workersʹ decisions to work now versus later depend on

Question

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Real business cycle theory suggests that workers base their decisions to work now or later on the real interest rate. This is because changes in the interest rate affect the opportunity cost of leisure, making it more or less attractive for workers to work. As the real interest rate rises, the opportunity cost of leisure increases, meaning that workers are more likely to decide to work now rather than later. Conversely, if the interest rate falls, the opportunity cost of leisure decreases, making it more attractive for workers to delay work and take more leisure time. Therefore, the real interest rate plays a crucial role in shaping the labor supply decisions of workers in real business cycle theory.

According to Real Business Cycle Theory, Workersʹ Decisions to Work