The Idea That a Permanent Increase in Income Causes a Larger

question 68

Multiple Choice

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the

• A)permanent income hypothesis.
• B)Friedman-Lucas theory.
• C)Ricardian equivalence theorem.
• D)intertemporal substitution effect.
• E)steady state theorem.

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Definitions:

Reason Abstractly

The cognitive ability to think about concepts, ideas, and principles that are not physically present or tangible.

Formal Operational

A stage of cognitive development, as per Piaget, where an individual gains the ability to think abstractly and logically.

Social Norms

Accepted behaviors and beliefs within a society or group, guiding members on what is considered appropriate or inappropriate conduct.

Volume Constancy

The perceptual phenomenon where the perceived volume of an object remains constant despite changes in distance or the angle of viewing.