Author Question: If disposable income falls, consumption expenditure falls ________. A) by an amount that depends ... (Read 55 times)

Alainaaa8 · **on:** Jun 30, 2018

If disposable income falls, consumption expenditure falls ________.

A) by an amount that depends on the real interest rate
B) so that planned expenditure remains constant
C) by an amount smaller than the decrease in disposable income
D) all of the above
E) none of the above

Question 2

What do economists mean when they characterize households and firms as forward looking?

What will be an ideal response?

Alyson.hiatt@yahoo.com · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

Economists assume that both consumers and firms consider the future in making consumption and investment decisions today. Consumers make decisions about allocating consumption over a lifetime, while firms make investment decisions based on expectations about future profitability.