According to the Statistical Model of Ando and Modigliani, It

question 3

Multiple Choice

According to the statistical model of Ando and Modigliani, it may be possible to explain the reduction in consumption that marked 1973 in terms of

• A) a sudden reduction in the long-run marginal propensity to consume.
• B) a sudden increase in the short-run marginal propensity to consume.
• C) a steep decline in the value of assets in which people hold their wealth.
• D) an inability of most consumers to see the temporary nature of the oil shock.
• E) an increase in saving caused by individuals wanting to prepare for an anticipated recovery from the oil shock in the medium term.

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Definitions:

Total Output

The total quantity of goods or services produced by an economic entity in a given period.

Marginal Productivity Theory

An economic theory that suggests the wage or value of a worker's output is equal to the additional production the worker generates.

Resource Demand

The desire and ability of a company or economy to acquire goods or services considered essential for operation.

Inherited Wealth

Wealth or assets passed down from one generation to another through inheritance, often influencing economic opportunities for individuals.