Short-Run Marginal Propensities to Consume Are Smaller Than Long-Run Propensities

question 51

Multiple Choice

Short-run marginal propensities to consume are smaller than long-run propensities in part because

• A) people need time to decide whether or not an increase in income is permanent or temporary and the propensity applied to a permanent change is smaller than the propensity applied to a temporary change.
• B) people need time to decide whether or not an increase in income is permanent or temporary and the propensity applied to a permanent change is larger than the propensity applied to a temporary one.
• C) people make rash decisions in the short run and thereby overspend.
• D) it takes a long time for the consumer durables that dominate long- run consumption to be delivered and paid for.
• E) none of the above.