In real business cycle theory, the supply of labour
A)increases if the demand for labour decreases.
B)increases if the real interest rate falls.
C)increases if the demand for loanable funds decreases.
D)is not influenced by changes in the real interest rate.
E)increases if the real interest rate rises.

Question

Quizplus · Accepted Answer

In real business cycle theory, the supply of labor increases if the real interest rate rises because higher real interest rates increase the opportunity cost of leisure, making individuals more inclined to work.

In Real Business Cycle Theory, the Supply of Labour