If Consumers Have Rational Expectations and Follow the Permanent-Income Hypothesis

question 81

Multiple Choice

If consumers have rational expectations and follow the permanent-income hypothesis, their current consumption will increase when:

• A) previously announced tax reductions are implemented.
• B) they receive an anticipated raise.
• C) they receive an unexpected inheritance.
• D) they make the last payment on their automobile loan.

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Definitions:

Sleep

A natural, reversible state of rest for the body and mind, essential for health and well-being.

WAIS-III

The third edition of the Wechsler Adult Intelligence Scale, a psychological test designed to measure cognitive ability in adults.

Intelligence

The ability to learn, understand, and apply information, solve problems, and adapt to new situations.

Correlation Coefficient

A statistical measure that calculates the degree to which two variables move in relation to each other.