Real business cycle economists claim that the intertemporal substitution effect
A)depends on the real interest rate.
B)plays a large role in the economy only during expansions.
C)has unpredictable effects on the economy.
D)plays a small role in the labour market.

Question

Quizplus · Accepted Answer

The intertemporal substitution effect depends on the real interest rate, as it influences individuals' decisions to work and consume at different times based on changes in the real interest rate.

Real Business Cycle Economists Claim That the Intertemporal Substitution Effect