If the real interest rate is 2 per cent and workers expect real wages to be 4 per cent higher next year, according to the real business cycle theory, workers will work
A)less this year and more next year.
B)less this year and less next year.
C)more this year and more next year.
D)more this year and less next year.

Question

Quizplus · Accepted Answer

According to the real business cycle theory, if workers expect higher real wages in the future, they may choose to work less this year and more next year to take advantage of the higher wages.

If the Real Interest Rate Is 2 Per Cent and Workers