The Basic IS Model Embodies the Life-Cycle and Permanent-Income Hypotheses

question 105

Multiple Choice

The basic IS model embodies the life-cycle and permanent-income hypotheses by:

• A) setting consumption proportional to potential output.
• B) keeping consumption growth zero.
• C) setting consumption proportional to the real interest rate.
• D) setting consumption equal to past income.
• E) incorporating the interest rate.

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Definitions:

Productive Contributions

Inputs or actions by individuals or entities that add value to the production process, resulting in the creation of goods or services.

Cardiovascular Risk

The likelihood of an individual experiencing cardiovascular events such as heart attack or stroke, often assessed based on factors like age, genetics, lifestyle, and medical history.

Sedentary

A lifestyle characterized by a significant amount of sitting or lying down with minimal physical activity, often linked to adverse health outcomes.

Social Support

The perception or reality of being cared for and having assistance available from other people, which can significantly impact health and well-being.