Intertemporal substitution explains why real GDP growth correlates positively with the employment-to-population ratio.

Question

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Intertemporal substitution refers to the idea that people may alter their behavior in response to changes in economic conditions over time. When real GDP growth is high, businesses may expand and create more job opportunities, leading to a higher employment-to-population ratio. Additionally, individuals may be more willing to work and invest in their education or training when economic conditions are favorable. Therefore, the positive correlation between real GDP growth and the employment-to-population ratio can be explained by intertemporal substitution effects.

Intertemporal Substitution Explains Why Real GDP Growth Correlates Positively with the Employment-To-Population