According to the Permanent Income Hypothesis, a Temporary Increase in Income

question 407

Multiple Choice

According to the permanent income hypothesis, a temporary increase in income that does not affect average lifetime income would

• A)cause a large increase in consumption.
• B)cause no change in consumption.
• C)cause an increase in consumption and saving by the same amount.
• D)cause a decrease in consumption and saving by the same amount.

---

Definitions:

Economy

The organized system of human activity involved in the production, consumption, and distribution of goods and services within a certain area or country.

Dishwasher

A machine used for automatically washing dishes and utensils.

Delivery Driver

A person employed to transport and deliver goods, packages, or food to various destinations, often requiring navigation skills and customer interaction.

Productivity

The efficiency at which goods or services are produced, often measured by the amount of output per unit of input.