Exam 10: Consumption Demand

Suppose the population were convinced that all current adjustments in income were temporary. In the short run then,

Empirical tests of the forward-looking model of consumption behavior

According to the statistical model of Ando and Modigliani, it may be possible to explain the reduction in consumption that marked 1973 in terms of

Which of the following statements is an accurate statement of an implication of the forward-looking theory of consumption?

When Ando and Modigliani set forth a consumption function depending on disposable income and the value of assets, they expected the coefficient for assets

Preferences for steady consumption paths over variable consumption paths mean that

Let there be a flat 20 percent income tax. Let the consumption function for an economy be given by C = 160 + 0.8YDP with permanent disposable income specified by YDP = 0.6YD + 0.4YD-1). If investment equals 200 and government spending amounts to 300, then what level of GDP would be equilibrium one year after GDP reached $1,500?

One reason why consumption expenditure is less volatile than GDP is that

If permanent income is always taken to equal disposable income in the current year, then a consumption function of the form C = a + bYDp)

The distinction between consumption and consumption expenditures, although subtle, becomes important in the case of

Suppose that you were to incorporate the repayment of a consumer loan interest and principal into an intertemporal budget constraint. The loan would be added as income in the year received and

Let C = 100 + 0.9YDp) be the consumption function for two people, A and B, with YDp) notationally indicating their view of their permanent income. Summarize that view by defining YDp) = 0.5YD-0) + 0.25YD-1) + 0.25YD-2) with YD-j) notationally representing disposable income lagged j years. If three successive years of disposable income equaling $10,000 were followed by a year of A earning $11,000 and B earning $15,000, then the marginal propensity to consume would equal

Given a 20-year planning horizon and a real interest rate of 0 percent, an individual receiving a $1,000 increase in income would display a marginal propensity to consume

Which of the following rankings accurately lists the major components of consumption expenditure in terms of their volatility over the business cycle?

Let the consumption function be defined by C = 0.85 + 0.8YDP with permanent disposable income specified according to YDP = 0.75YD + 0.25YD-1). Which of the following is true?

In 1968, the Johnson administration passed a temporary surcharge on the personal income tax. Which of the following most closely describes the public's response?

Suppose someone anticipates a large increase in income sometime during the n ext ye a r. The more like ly it ap p e a rs that that increase will be perm a n e n t ,

In the event consumers expected a tax cut in the future, forward-looking consumption behavior on their part would bring about

Of the major components of consumption expenditure, which of the Following has been increasing most rapidly over the past decade or so in the United States?

Let C = 100 + 0.9YDp) reflect a consumption function with YDp) representing the individual's view of permanent disposable income; let permanent income be defined by YDp) = 0.5YD-0) + 0.25YD-1) + 0)25YD-2) with YD-j) notationally representing disposable income lagged j years. If disposable income were $10,000 in each of three successive years-0, 1, and 2-then consumption in year 4 would equal