Multiple Choice
There are strong theoretical reasons to expect that changes in wealth are responsible for changes in consumption. Nonetheless, one reason that we observe a tight link between consumption and disposable income is...
A) credit rationing which changes the intertemporal budget constraint for borrowers.
B) households attempt to smooth their consumption.
C) household saving provides a buffer between income and expenditure.
D) ricardian equivalence.
Correct Answer:
Verified
Correct Answer:
Verified
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