Suppose a Permanent Increase in Disposable Income Were Received by Individuals

Multiple Choice

Suppose a permanent increase in disposable income were received by individuals with 25 years of working lifetime ahead of them before 10 years of retirement. If they expected positive real interest rates to prevail over the foreseeable future, then forward-looking consumption theory would predict a marginal propensity to consume of

A) something less than 0.6 depending on expected real rates of interest.
B) exactly 0.6 regardless of the real rates of interest.
C) something over 0.6 but invariant to the real rates of interest.
D) something over 0.6 depending on the real rate of interest.
E) something over the "Keynesian" estimate of 0.91, but unspecified because of insufficient information.