While Modigliani's LCH is similar to Friedman's PIH in several ways, it does differ in that it
A) assumes individuals base their consumption decisions on a time span greater than one year.
B) assumes that individuals prefer to maintain a stable consumption pattern.
C) attempted to reconcile the seemingly paradoxical cross-section and time-series empirical data.
D) gives an important role to assets as a determinant of consumption behavior.
D
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Answer the next question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government SpendingTax RevenuesGDPYear 1$450$425$2,000Year 25004503,000Year 36005004,000Year 46406205,000Year 56805804,800Year 66006205,000The budget deficit in year 3 is
A. $3,050 billion. B. $295 billion. C. $175 billion. D. $100 billion.
The Long-Run Phillips Curve is vertical, suggesting that ________
A) allowing inflation to rise will not succeed in keeping unemployment low B) changes in unemployment have no lasting impact on inflation C) shifts of the short-run Phillips curve impact inflation, but have no effect on unemployment D) all of the above E) none of the above
Briefly discuss the organization of the Federal Reserve. Include in your answer a discussion of the individuals/groups who make decisions about monetary policy
What will be an ideal response?
The tendency of people to overestimate the value of their possessions when, say, considering such value for insurance purposes is known in prospect theory as the:
A. Anchoring effect B. Endowment effect C. Status quo bias D. Confirmation bias