Empirical Tests of the Forward-Looking Model of Consumption Behavior

question 2

Multiple Choice

Empirical tests of the forward-looking model of consumption behavior

• A) confirm all its implications with household level data.
• B) fail miserably with aggregate data, since aggregation obscures the behavior of individual decision-making units.
• C) show evidence that liquidity constraints cause some households' consumption to be insensitive to temporary income changes.
• D) show evidence that liquidity constraints cause some households' consumption to be overly sensitive to income changes in the short run.
• E) none of the above.

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Definitions:

Unliquidated Debt

A debt or claim where the amount owed has not been determined or agreed upon by the debtor and creditor.

Different Performance

The execution of contractual obligations in a manner that varies from the exact terms agreed upon, potentially leading to disputes.

Machiavellianism

Causes someone to view and manipulate others purely for personal gain.

Emotional Adjustment

The process of managing and stabilizing one's emotional state to adapt to stresses and demands in a healthy manner.