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

question 9

Multiple Choice

If consumers obey the permanent-income hypothesis and have rational expectations, then ______ policy changes influence consumption.

• A) only unexpected
• B) only expected
• C) both expected and unexpected
• D) neither expected nor unexpected

---

Definitions:

Underpayment

The situation in which an individual or group receives less compensation than is fair or deserved for their work or services.

Overpayment

The situation in which an individual or entity receives more money than is due for services provided or work done.

Monetary Incentives

Financial rewards given to employees or stakeholders to motivate performance or behaviors aligned with organizational objectives.

Performance Increases

Improvements in the efficiency, effectiveness, or quality of work produced by an individual or team.