The Permanent Income Model Implies That

Multiple Choice

The permanent income model implies that

A) a permanent tax cut has a larger effect on consumption than does a temporary tax cut.
B) a permanent tax cut has a smaller effect on consumption than does a temporary tax cut.
C) tax cuts should not be used because consumers are not rational.
D) both permanent and temporary tax cuts are effective in changing consumption.
E) both permanent and temporary tax cuts have no effects on consumption.