The key ripple effect in real business cycle theory is the ________ decision and it depends on the ________.
A) when-to-invest; real interest rate
B) when-to-work; real interest rate
C) what-to-save; nominal interest rate
D) where-to-work; real wage rate

Question

Quizplus · Accepted Answer

In real business cycle theory, the key ripple effect is the "when-to-work" decision, which is influenced by the real interest rate as it affects the intertemporal substitution of labor.

The Key Ripple Effect in Real Business Cycle Theory Is