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:

Solid Object

A physical item that maintains a consistent shape and volume under normal conditions, unlike liquids or gases.

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The process of putting together various elements or parts to form a complete unit or system.

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A scaled-down replica of a ship, often used for display or hobby purposes.

Egocentrism

The inability to differentiate between oneself and other people, often leading to viewing the world from only one's perspective.