In our model with a work-leisure decision in both time periods of life, the optimal choice of time spent working when young is positively related to expectations about the real interest rate; that is, and holding all else constant, when the expected real interest rate rises, young households are predicted to increase the amount of time they spend working. What is the economic/behavioural logic behind this prediction? Explain.

In our model with a work-leisure decision in both time periods of life, the optimal choice of time spent working when young is positively related to expectations about the real interest rate; that is, and holding all else constant, when the expected real interest rate rises, young households are predicted to increase the amount of time they spend working. What is the economic/behavioural logic behind this prediction? Explain.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.7P

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