Consumption Is Most Likely to Respond One- For- One with Changes

Multiple Choice

Consumption is most likely to respond one- for- one with changes in current income when:

A) people are able to borrow as much as they wish, as long as they pay it back.
B) the change in current income is caused by the business cycle.
C) people believe the change in their current income is permanent.
D) the change in current income results from a one- time government handout.
E) people believe the change in their current income is temporary.