The Life-Cycle/Permanent Income Model of Consumption makes a different prediction from the Keynesian Model, about how Consumption reacts to an increase in current income. Which of the following is the best description of the difference? O In the Keynesian Model, consumers will increastheir spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will not increase their spending by much unless they believe that the increase in their income is permanent. O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc times the increase in income. In the Keynesian Model, consumers will only increase their spending if they believe that the increase in their income is temporary. O In the Keynesian Model, consumers will increase their spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will only increase their spending if they believe that the increase in their income is temporary. O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc times the increase in income In the Keynesian Model, consumers will not increase their spending by much unless they believe that the increase in their income is permanent.
The Life-Cycle/Permanent Income Model of Consumption makes a different prediction from the Keynesian Model, about how Consumption reacts to an increase in current income. Which of the following is the best description of the difference? O In the Keynesian Model, consumers will increastheir spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will not increase their spending by much unless they believe that the increase in their income is permanent. O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc times the increase in income. In the Keynesian Model, consumers will only increase their spending if they believe that the increase in their income is temporary. O In the Keynesian Model, consumers will increase their spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will only increase their spending if they believe that the increase in their income is temporary. O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc times the increase in income In the Keynesian Model, consumers will not increase their spending by much unless they believe that the increase in their income is permanent.
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
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Transcribed Image Text:The Life-Cycle/Permanent Income Model of Consumption makes a different prediction
from the Keynesian Model, about how Consumption reacts to an increase in current
income. Which of the following is the best description of the difference?
O In the Keynesian Model, consumers will increasktheir spending by the mpc times the increase in
income. In the Life-Cycle/Permanent Income Model, consumers will not increase their spending
by much unless they believe that the increase in their income is permanent.
O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc
times the increase in income. In the Keynesian Model, consumers will only increase their
spending if they believe that the increase in their income is temporary.
O In the Keynesian Model, consumers will increase their spending by the mpc times the increase in
income. In the Life-Cycle/Permanent Income Model, consumers will only increase their
spending if they believe that the increase in their income is temporary.
O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc
times the increase in income In the Keynesian Model, consumers will not increase their
spending by much unless they believe that the increase in their income is permanent.
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