According to the permanent-income hypothesis, a permanent increase in a person's income will
A) increase consumption more than savings.
B) increase savings more than consumption.
C) be smoothed out to where the increases in consumption and savings are roughly equal.
D) have the same effect on consumption as a transitory increase in income.
A
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In the consumption function C = a + c(Y - T), "autonomous consumption" appears as
A) a. B) c. C) cY. D) -cT. E) c(Y - T).
According to real business cycle theory, an increase in financial frictions might lead to ________, if ________
A) a decrease in output; the rise in the credit spread causes a leftward shift of aggregate demand B) a decrease in inflation; the disruption of capital markets results in a leftward shift of long-run aggregate supply C) a decrease in output; the disruption of capital markets results in a leftward shift of long-run aggregate supply D) a decrease in output; a decline in expected output causes a leftward shift of aggregate demand
The increase importance of Social Security taxes at the federal level has likely _____
a. decreased the excess burden of the federal tax sytem b. increased the efficiency of the federal tax system c. increased the progressivity of the federal tax system d. reduced the progressivity of the federal tax system
When Peter earned $65,000 he purchased 10 novels a year. His income has just increased to $68,000 and he plans to purchase 15 novels this year. Peter's income elasticity of demand for novels equals
A. 8.87. B. 0.11. C. 1.67. D. 0.