According to the Permanent-Income Hypothesis, If Consumers Receive a One-Time

question 85

Multiple Choice

According to the permanent-income hypothesis, if consumers receive a one-time income bonus, then they will:

• A) save most of it in the current year.
• B) spend most of it in the current year.
• C) spend one half of it and save one-half of it in the current year.
• D) not alter their consumption or saving in the current year.

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Definitions:

Percentage Of Sales

A financial ratio that compares a particular expense or income to the total sales, expressing the result as a percentage to analyze trends or performance.

Margin Of Safety

The difference between actual or projected sales and the break-even point, usually expressed in percentage terms, indicating the buffer against a loss.

Operating Leverage

The degree to which a firm can use fixed operating costs to magnify the effects of changes in revenue on its operating income.

Salesvolume

Refers to the total number of units sold within a specific period.