According to the Current Income Hypothesis

question 161

Multiple Choice

According to the current income hypothesis,

• A) a change in income regarded as temporary will not affect consumption much since it will have little effect on average lifetime income.
• B) regardless of whether a change in disposable personal income is permanent or temporary; people will change consumption by moving along the consumption function.
• C) a change in income regarded as permanent will have a greater impact on saving than on consumption.
• D) a change in income regarded as temporary will have a greater impact on saving than on consumption.

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Definitions:

LIFO

An inventory valuation method that assumes the most recently produced items are the first to be sold, with costs calculated accordingly.

Work in Process

Inventory that includes goods that are in the process of being manufactured but are not yet completed.

Raw Materials Inventory

Items acquired for the purpose of processing into finished goods.

Finished Goods

Products that have completed the manufacturing process but have not yet been sold to customers.