According to the Permanent-Income Hypothesis,a Transitory Increase in a Person's

question 29

Multiple Choice

According to the permanent-income hypothesis,a transitory increase in a person's income will

• A) increase consumption more than savings.
• B) increase savings more than consumption.
• C) be smoothed out to where the increases in consumption and savings are roughly equal.
• D) have the same effect on consumption as a permanent increase in income.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing ownership equity in the company.

Cash Dividend

A financial disbursement by a corporation to its stockholders, often as part of the company's profit sharing.

Stock Dividend

A dividend payment made in the form of additional shares rather than cash, increasing the number of outstanding shares.

Common Stock

Equity ownership in a corporation, entitling holders to vote on corporate matters and receive dividends.