Author Question: Which of the following is a reason that consumption depends on current income, and not just on total ... (Read 97 times)

abern · **on:** Jun 30, 2018

Which of the following is a reason that consumption depends on current income, and not just on total wealth?

A) Banks will not always lend money to those who want to consume more than their income.
B) The anticipation of future financial distress makes some people reluctant to borrow.
C) Low income people may prefer to postpone some consumption until later years, when their incomes are higher.
D) all of the above
E) none of the above

Question 2

Based on our understanding of the IS-LM model that takes into account dynamics, we know that a reduction in the money supply will cause

A) an immediate drop in Y and immediate increase in i.
B) an immediate increase in i and no initial change in Y.
C) a gradual increase in i and gradual reduction in Y.
D) none of the above