Which of the Following Statements Is an Accurate Statement of an Implication

question 4

Multiple Choice

Which of the following statements is an accurate statement of an implication of the forward-looking theory of consumption?

• A) The marginal propensity to consume tends to be smaller than it would be otherwise because people view at least part of every income change as temporary.
• B) Sensitivity of consumption to the interest rate tends to make the IS curve flatter than it would be otherwise.
• C) Sensitivity of saving to the interest rate tends to make the marginal propensity to consume smaller than it would be otherwise.
• D) The likely effect of the implied reduction in the short-run marginal propensity to consume tends to make the IS curve steeper than it would be otherwise.
• E) All of the above.

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Definitions:

Sentiment

The social aspect of emotion. Components of human responses that separate them from analogous responses animals would have.

Affect

A subjective positive or negative evaluation of an object, which can vary in direction, intensity, and activity.

Emotion

A complex psychological state involving three distinct components: a subjective experience, a physiological response, and a behavioral or expressive response.

Mood

A general psychological condition that characterizes an individual’s experience and emotional orientation for hours or even days. Considerably less specific than an emotion.