Errors Made by Researchers Using the Long-Term Estimate of the Marginal

Multiple Choice

Errors made by researchers using the long-term estimate of the marginal propensity to consume to predict short-term movement in consumption can be extremely large. It is important, therefore, to understand when those errors might occur. If you were to draw the simple Keynesian consumption with MPC = 0.94 on a piece of graph paper, then you would expect to plot

A) the combination of consumption and GDP for 1973 above the line.
B) the combination of consumption for 1983 below the line.
C) the combination of consumption and GDP for 1975 above the line.
D) the combination of consumption and GDP for 1946 below the line.
E) none of the above.