Suppose an Individual Experiences a $25,000 Decrease in Real Income

Multiple Choice

Suppose an individual experiences a $25,000 decrease in real income and the individual believes this decrease in income is permanent. Economic theory suggests that this individual's current consumption will:

A) decrease, remain unchanged, or increase, depending on the value of the real interest rate.
B) decrease by more than $25,000.
C) decrease at most by $25,000.
D) decrease or remain unchanged, depending on the value of the real interest rate.
E) decrease by less than $25,000.