For this question, ignore tax considerations of each of the following. Assume that consumption decisions are made according to the permanent income theory. Which of the following would lead to the smallest increase in current consumption?
A) winning 10,000 in the lottery
B) inheriting 10,000 from a relative
C) obtaining 10,000 by winning a lawsuit
D) getting a one-time 10,000 bonus from your employer
E) all of the above
Question 2
Based on our understanding of the IS-LM model that takes into account dynamics, we know that an increase in the money supply will cause
A) an immediate increase in i and no initial change in Y.
B) an immediate decrease in i and no initial change in Y.
C) a gradual decrease in i and gradual increase in Y.
D) none of the above
