Suppose a Permanent Increase in Disposable Income Were Received by Individuals

question 33

Multiple Choice

Suppose a permanent increase in disposable income were received by individuals with 25 years of working lifetime ahead of them before 10 years of retirement. If they expected positive real interest rates to prevail over the foreseeable future, then forward-looking consumption theory would predict a marginal propensity to consume of

• A) something less than 0.6 depending on expected real rates of interest.
• B) exactly 0.6 regardless of the real rates of interest.
• C) something over 0.6 but invariant to the real rates of interest.
• D) something over 0.6 depending on the real rate of interest.
• E) something over the "Keynesian" estimate of 0.91, but unspecified because of insufficient information.

---

Definitions:

German Jews

Refers to Jews who are from Germany or of German descent, historically significant due to their experiences, particularly during the Holocaust.

Non-Jews

Individuals who do not adhere to or are not part of the Jewish faith or ethnic group.

Bureaucratic Inertia

Refers to the tendency of large, rigid bureaucracies to continue their policies even when their clients’ needs change.

Internet Crimes

Illegal activities conducted through the internet, including fraud, hacking, identity theft, and cyberbullying, among others.