Today, the real wage rate is $10 an hour and the real interest rate is 5 percent
ID: 1184654 • Letter: T
Question
Today, the real wage rate is $10 an hour and the real interest rate is 5 percent a year. People expect the real wage rate to be $10.05 an hour in one year. The $10 an hour earned now will be worth ________ a year from now. The intertemporal substitution effect tells us that people will want to work ________. 8) _______ A) $10.05 an hour; more both now and next year B) $15.00 an hour; the same amount now and next year C) $10.50 an hour; more now and less next year D) $10.50 an hour; more next year and less nowExplanation / Answer
10 / 1.05 = 9.52
C) is the answer
A) 10.05, more now and not next year, false
B) 15, more now and lesser(but not less) next year, false
C) c is true
D) false