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:

Medication

Substances used in the diagnosis, treatment, or prevention of disease and as part of medical care to alleviate symptoms and improve health.

Risk

Risk involves exposure to the chance of injury or loss, a measure often assessed in decision-making processes.

Bounded Rationality

The concept that decision-making is limited by the information available, cognitive limitations of the mind, and the finite amount of time available to make a decision.

Mathematical Abilities

The capacity to perform and understand various mathematical operations and concepts.