The Application of Rational Expectations to the Permanent-Income Hypothesis Implies

question 1

Multiple Choice

The application of rational expectations to the permanent-income hypothesis implies that information contained in

• A)only past income levels will determine permanent income.
• B)only past income levels will determine transitory income.
• C)only new changes in income that are unanticipated can change permanent income.
• D)only new changes in income that are anticipated can change permanent income.

---

Definitions:

Fetus

A fetus refers to a developing mammal or human after the embryonic stage and before birth, characterized by rapid growth and the formation of body structures.

Chorion

The outermost membrane surrounding an embryo of a reptile, bird, or mammal, contributing to the formation of the placenta in mammals.

Hairs

Filamentous biomaterials growing from the dermis of mammals, serving various functions including temperature regulation and sensation.

Placenta

An organ in mammals that develops during pregnancy, providing oxygen and nutrients to the fetus while removing waste products.