If Permanent Income Is Always Taken to Equal Disposable Income

question 9

Multiple Choice

If permanent income is always taken to equal disposable income in the current year, then a consumption function of the form C = a + bYDp)

• A) reveals a long-run marginal propensity to consume that is larger than the short-run marginal propensity to consume.
• B) reveals a long-run marginal propensity to consume that is exactly equal to the short-run marginal propensity to consume.
• C) reveals a long-run marginal propensity to consume that is smaller than the short-run marginal propensity to consume.
• D) defines short- and long-run marginal propensities to consume, to be sure, but insufficient information has been provided to compare them.
• E) is difficult to specify in times of uncertain income.

---

Definitions:

Looking Backward

A utopian novel published in 1888 by Edward Bellamy, depicting the year 2000 and the transformative impact of a socialist society on the United States.

Industrialization

The process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods, leading to technological innovation and urbanization.

Socialist Regimes

Socialist regimes are political systems where the government owns or regulates the means of production and distribution of goods, aiming for equal wealth distribution.

Andrew Carnegie

A 19th-century industrialist and philanthropist known for his massive wealth derived from the steel industry and his significant contributions to education, libraries, and peace initiatives.