Question 5 Consider the neoclassical model of labour supply. You can think of the basic version with loga- rithmic utility, and the standard optimality conditions and budget constraints. A temporary fu- ture increase in the wage rate (e.g., wt+1 and wt+2 increase while 10: remains constant) A)[ will reduce today's labour supply because of the income effect. B)[ will increase today's labour supply because of consumption smoothing. D)[ will increase today's labour supply because of the static substitution effect with consump- l l C)[ ] will reduce today's labour supply because of the intertemporal substitution effect. l tion. E)[ ] A and C. F)[ ] None of the above