According to the real business cycle theory, a decrease in the real interest rate today increases current labor supply.

Question

Quizplus · Accepted Answer

According to real business cycle theory, a decrease in the real interest rate reduces the cost of borrowing, which can lead to an increase in investment and consumption. This might increase demand for labor in the future, but it does not directly increase current labor supply. The decision to supply labor is more directly influenced by current wages, productivity, and preferences for leisure versus labor.

According to the Real Business Cycle Theory, a Decrease in the Real