The Keynesian View of Consumption Differs from the Permanent Income

question 45

Multiple Choice

The Keynesian view of consumption differs from the permanent income hypothesis because the Keynesian view assumes that:

• A) consumption varies with changes in current income.
• B) temporary tax cuts will have no effect on consumption.
• C) consumption depends on lifetime earnings.
• D) the marginal propensity to consume is equal to 1.

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Definitions:

Natural Capital

The world's stocks of natural assets which include geology, soil, air, water, and all living organisms.

Gross Domestic Product

The total value of all goods and services produced within a country in a specific time period, a measure of economic performance.

Economic Outputs

The total value of all goods and services produced by an economy over a specific period of time.

Gross Domestic Product

The total value of all goods and services produced within a country over a specific time period.