If We Compare the Life-Cycle Theory of Consumption with the Permanent-Income

question 24

Multiple Choice

If we compare the life-cycle theory of consumption with the permanent-income theory we can conclude that they both

• A)pay careful attention to microeconomic foundations
• B)agree that temporary tax cuts can be used to stimulate the economy
• C)have similar theoretical bases but disagree widely in their policy implications
• D)explain why large changes in current income cause large changes in current consumption
• E)none of the above

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The predetermined price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Market Price

The current financial rate for assets or services set by the open market.

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