Multiple Choice
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
A) of 1 if the increase is thought to be permanent and 0.5 if it is viewed as a one-time windfall.
B) of 1 if the increase is thought to be permanent and 0.05 if it is viewed as a one-time windfall.
C) that is higher if the increase is permanent than temporary, but it is impossible to specify exact numbers with the information provided.
D) that is lower if the increase is permanent than temporary, but it is impossible to specify exact numbers with the information provided.
E) none of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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