If the Permanent-Income Hypothesis Is Correct, and If Consumers Have

question 73

Multiple Choice

If the permanent-income hypothesis is correct, and if consumers have rational expectations, then changes in consumption over time should be:

• A) predictable.
• B) unpredictable.
• C) mostly positive.
• D) mostly negative.

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Definitions:

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Characteristics of a substance that lead to compulsive use, despite harmful consequences, often involving physical or psychological dependence.

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