Both the Permanent-Income and Life-Cycle Hypotheses Modify Keynesian Consumption Theory

question 95

Multiple Choice

Both the permanent-income and life-cycle hypotheses modify Keynesian consumption theory by distinguishing the effects of

• A)temporary and permanent changes in disposable income.
• B)changes in the disposable income of upper income and lower income classes.
• C)changes in labor income and interest income.
• D)small and large changes in disposable income.

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Definitions:

Sales Dollars

The total revenue generated from the sale of goods or services, measured in dollar amount.

Common Fixed Expenses

Expenses that remain constant in total regardless of changes in the level of activity or volume of output.

Break-even

The point at which total cost and total revenue are equal, meaning there is no net loss or gain.

Net Operating Income

The total profit of a company after operating expenses but before deducting interest and taxes.