An Intuitive Explanation of the Observed Discrepancy Between Short- and Long-Run

question 42

Multiple Choice

An intuitive explanation of the observed discrepancy between short- and long-run marginal propensities to consume must focus on why

• A) consumption falls by less than income in the short run but eventually achieves over 90 percent of income's decline.
• B) consumption climbs slower than income in the short run but eventually exhausts over 90 percent of income's increase.
• C) consumption moves more slowly in either direction than income in the short run but eventually matches either move almost exactly.
• D) a and b.
• E) none of the above.

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Definitions:

Extra Funds

Additional money available beyond what is necessary for regular expenses, which can be saved or invested.

Input Costs

Expenses that are incurred in order to produce goods or services.

Beverages

Liquid drinks, which can be alcoholic or non-alcoholic, consumed for refreshment or pleasure.

Appetizers

Small dishes served before the main meal to stimulate the appetite.