What Does the Permanent-Income Theory of Consumption Predict You Would

question 20

Multiple Choice

What does the permanent-income theory of consumption predict you would most likely do with $25,000 that you just won on a TV game show?

• A)travel throughout Europe and eat in five-star restaurants
• B)invite all your friends to a big bash
• C)put the money in the bank to finance your next year in college
• D)take a trip to Las Vegas to try and double your winnings
• E)none of the above

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Definitions:

Standard Normal Distribution

A normal distribution with a mean of zero and a standard deviation of one, used as a basis for comparing other normal distributions.

Less Than

A mathematical relation indicating that one quantity is smaller than another.

Z-scores

A statistical measurement of how many standard deviations an element is from the mean of its population.

Shaded Area

The portion of a graph or diagram overlaid with a color or pattern to denote a particular section or significance.