Liquidity Constraints Explain

question 7

Multiple Choice

Liquidity constraints explain

• A)why consumers may spend less than the permanent-income theory predicts as their current income falls
• B)why consumption may increase more than the life-cycle hypothesis predicts when income recovers after a recession
• C)why consumers may sometimes behave in a manner predicted by the simple Keynesian consumption function
• D)all of the above
• E)none of the above

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