Today, the Real Wage Rate Is $10 an Hour and the Real

Multiple Choice

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 .

A) $10.05 an hour; more both now and next year
B) $10.50 an hour; more now and less next year
C) $10.50 an hour; more next year and less now
D) $15.00 an hour; the same amount now and next year