Which of the Following Summarize the Findings in the Consumption

question 36

Multiple Choice

Which of the following summarize the findings in the consumption expenditure literature?
i. The permanent income hypothesis provides a useful description of household consumption behavior.
ii. Households do not engage in precautionary saving.
iii. The marginal propensity to consume out of temporary income is high.

• A) i
• B) i and iii
• C) ii and iii
• D) iii
• E) ii

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Definitions:

Variable Cost

Charges that are directly linked to the volume of production or sales metrics.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including expenses like rent, salaries, and insurance fees.

High-low Method

A technique in cost accounting used to estimate fixed and variable costs by analyzing the highest and lowest levels of activity and their respective costs.

Variable Cost Per Unit

The cost that varies with the level of output or production, calculated on a per-unit basis.