Actual Consumption Behavior Exhibits Both "Excess Smoothness" and "Excess Sensitivity

question 41

Multiple Choice

Actual consumption behavior exhibits both "excess smoothness" and "excess sensitivity," which means that

• A)consumption responds too strongly to surprise changes in income
• B)consumption responds too little to predictable changes in income
• C)consumption always follows a random walk
• D)consumption always adjusts with long lags
• E)none of the above

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Definitions:

Fluctuate

To change or vary irregularly in number, amount, or degree; often used to describe variables that do not remain constant.

Adult Personality

The range of enduring personal characteristics and traits that define an adult individual's enduring patterns of thinking, feeling, and behaving.

Change

The process of becoming different, which can occur in physical, social, psychological, or environmental realms.

Developmental Period

A phase in the lifespan characterized by specific types of growth or change, such as infancy, childhood, adolescence, and adulthood.