"Intertemporal substitution" in labor supply describes changes in labor supply in response to changes in
A) personal tax rates.
B) investment spending.
C) the real interest rate.
D) consumer demand for goods.

Question

Quizplus · Accepted Answer

Intertemporal substitution in labor supply refers to how individuals adjust their labor supply over time in response to changes in the real interest rate. When the real interest rate increases, individuals might choose to work more now (and save more) because the return on savings is higher, planning to work less in the future. Conversely, if the real interest rate decreases, individuals might choose to work less now and more in the future.

"Intertemporal Substitution" in Labor Supply Describes Changes in Labor Supply