Which of the Following Provides an Example of Decisions That

question 29

Multiple Choice

Which of the following provides an example of decisions that are consistent with the permanent income theory?

• A) New retirees do not know that their retirement pensions provide a fixed income for life.
• B) An increase in government spending during a recession causes a bigger deficit that year but is not a long-run increase in spending.
• C) A one-year tax rebate increases disposable income, but households save most of the rebate.
• D) Landlords set rent as a percentage of each renter's income.