Using the Neoclassical Model of Consumption,an Implication of the Permanent

Multiple Choice

Using the neoclassical model of consumption,an implication of the permanent income hypothesis is ___________ because of __________.

A) consumption smoothing;diminishing marginal utility
B) permanent income follows a random walk;aggregate demand shocks
C) wealth is constant;real interest rates are,more or less,constant
D) a low discount factor;the borrowing constraint
E) no borrowing;income in the future is higher