Empirical Tests of the Forward-Looking Model of Consumption Behavior

Multiple Choice

Empirical tests of the forward-looking model of consumption behavior

A) confirm all its implications with household level data.
B) fail miserably with aggregate data, since aggregation obscures the behavior of individual decision-making units.
C) show evidence that liquidity constraints cause some households' consumption to be insensitive to temporary income changes.
D) show evidence that liquidity constraints cause some households' consumption to be overly sensitive to income changes in the short run.
E) none of the above.