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.

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Definitions:

Obsessive-Compulsive Behaviors

Repetitive actions or mental acts that a person feels compelled to perform, often driven by irrational fears or thoughts.

Avoidance Learning

A type of learning in which an organism learns to prevent or avoid an unpleasant experience.

Conditioned Response

A learned reaction to a specific stimulus as a result of conditioning, where the response becomes automatic or reflexive.

Little Albert

Refers to a classic experiment in psychology where a young child was conditioned to fear a white rat, demonstrating how fears can be acquired through classical conditioning.