Question: The basic idea of dynamic life-cycle models is that individuals plan out their lifetime labour supply, given their expected lifetime environment. a) Explain the reasoning

The basic idea of dynamic life-cycle models is that individuals plan out their lifetime labour supply, given their expected lifetime environment.

a) Explain the reasoning of the dynamic life-cycle models of labour supply. What are the major elements and predictions?

b) Compare the labour supply response that one would expect from a transitory, unanticipated wage increase and an evolutionary, anticipated wage increase.

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