If Consumers Have Rational Expectations and Follow the Permanent-Income Hypothesis

question 81

Multiple Choice

If consumers have rational expectations and follow the permanent-income hypothesis, their current consumption will increase when:

• A) previously announced tax reductions are implemented.
• B) they receive an anticipated raise.
• C) they receive an unexpected inheritance.
• D) they make the last payment on their automobile loan.

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Definitions:

Aversive Stimuli

Stimuli that an organism seeks to avoid due to their unpleasant nature, often used in conditioning and behavioral studies.

Respondent Behavior

Behavior that occurs as an automatic response to a specific stimulus, often without conscious intention, as studied in classical conditioning.

Operant Behavior

Behavior that is controlled by its consequences, including rewards and punishments, in the context of operant conditioning.

Functional Analysis

In behaviorism, a description of how a behavior is a function of the environment of the person or animal that performs it.