The idea that consumption increases at the same rate as national income so that MPC is constant, is known as the
a. absolute income hypothesis
b. Keynesian income hypothesis
c. relative income hypothesis
d. permanent income hypothesis
e. rational income hypothesis
C
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Why are aggregate demand shocks not a good explanation of business cycles in the New Keynesian model?
A) The wage is not constant. B) Employment does not fluctuate. C) Prices in the model are procyclical. D) Consumption is not procyclical.
The government heavily subsidizes the production of ethanol to encourage the purchase of ethanol over oil, a less environmentally friendly form of energy. Given that the supply elasticity of ethanol, ?, is estimated to be about 0
13, what would the elasticity of demand, ?, have to be for consumers to receive at least half of the subsidy, and therefore encourage ethanol consumption? A) ? must be less than . B) ? must be greater than . C) ? must be more inelastic than the elasticity of supply. D) Both A and C.
The law of diminishing marginal utility guarantees that demand curves will have positive slopes
a. True b. False Indicate whether the statement is true or false
Utilitarians believe that the proper goal of the government is to maximize the sum of the utilities of everyone in society
a. True b. False Indicate whether the statement is true or false