As national income increases, consumption spending increases as well, always by the same amount. That is, as national income increases, MPC remains constant, according to
a. Duesenberry's relative income hypothesis
b. Keynes's absolute income hypothesis
c. Friedman's permanent income hypothesis
d. Modigliani's life-cycle hypothesis
e. real asset theory
A
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What is meant by a speculative bubble?
a. A pattern in past stock prices that, according to technical analysts, indicates higher future prices. b. A circumstance where everyone expects higher prices, which in turn causes higher prices. c. An occasional occurrence in program trading in which many investors simultaneously receive instructions to sell. d. A situation where poorly informed traders exacerbate any upturns or downturns in the market.
In an open economy, the government purchases multiplier will be smaller the
A) larger the marginal propensity to consume. B) smaller the marginal propensity to import. C) larger the tax rate. D) All of the above are correct.
The problems created by price controls become greatest as time goes by when:
A. demand becomes more in elastic and supply becomes more elastic. B. demand and supply become more inelastic. C. demand and supply become more elastic. D. supply becomes more inelastic and demand becomes more elastic.
If firms in a monopolistically competitive industry are ________, then in the long run new firms producing close substitutes will enter the industry.
A. suffering economic losses B. breaking even C. producing where MR = MC D. earning economic profits