According to the Permanent Income Hypothesis, Why Did Consumption and Borrowings

question 47

Multiple Choice

According to the permanent income hypothesis, why did consumption and borrowings grow substantially in the late 1990s and 2000s?

• A) The late 1990s and 2000s was a period of sustained and historically low interest rates.
• B) The government enacted income tax cuts for a year beginning in 1990.
• C) The prices of assets like property were continually falling in the late 1990s and 2000s.
• D) In the late 1990s and 2000s, the level of consumer confidence was low as employment

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Definitions:

Machine-Hours

A measure of production output or activity level, representing the total hours that machinery is operating over a specific period of time.

Markup

The difference between the cost of a good or service and its selling price, expressed as a percentage over the cost.

Variable Manufacturing Overhead

Costs that vary with production volume, including indirect materials, indirect labor, and other expenses that increase or decrease with output.

Direct Labor-Hours

The complete tally of hours that employees dedicate to the manufacturing process.