The Sensitivity of Current Consumption to Changes in Current Income

question 31

Multiple Choice

The sensitivity of current consumption to changes in current income can be explained by

• A)myopia
• B)the absence of liquidity constraints
• C)the fact that consumers have the opportunity to borrow
• D)the fact that consumers always realize when a permanent change in income has occurred
• E)none of the above

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Definitions:

Physical Arousal

A physiological response of the body that prepares it for action, characterized by increased heart rate, breathing, and blood pressure, often triggered by stress, excitement, or exercise.

Spillover Effect

The phenomenon in which feelings, attitudes, or behaviors in one area of one's life transfer to, or influence, another.

Epinephrine

A hormone and neurotransmitter also known as adrenaline, involved in regulating heart rate, blood vessel and air passage diameters, and metabolic shifts.

Physiological Arousal

Refers to the body's response to stimuli, resulting in increased physical activity and alertness, including faster heartbeat and breathing.