Answer to Question #86007 in Macroeconomics for kertrese alexander

Question

Suppose that the public’s taste changes in such a way that leisure comes to be more desirable than commodities. How would you expect such a change to affect output, employment, and the real wage in the classical model?

Answer 1

Preference of leisure over goods lowers the demand for production sector. Therefore, output, employment and real wage in the classical model will tend to decrease.