Explain the concepts of excess sensitivity and excess smoothness that arises from the empirical literature on the permanent income hypothesis? What could explain these findings?
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(A). Explain the concepts of excess sensitivity and excess smoothness that arises from the empirical literature on the permanent income hypothesis? What could explain these findings?
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- what does the Relative Income hypothesis, permanant income hypothesis, and the life circle hypothesis have in common. how the keyensian hypothesis and that of the permanent income hypothesis differ in term of their policy implication. compare the policy implication of each of the following theories of comsumption behavior, the permanant income, relative income and the life circle hypothesis.Relate the permanent income hypothesis to the Ricardian equivalence theorem.Please answer the following question: 1. Economic advisors who fear that economy is growing too rapidly and that inflation may accelerate to high levels whould recommend that the government decreases spending/or increase taxes. a) True b) False
- Discuss the major contributions and implications of the baumol-tobin inventory theory modelThis question has two parts and concerns the permanent income hypothesis. Which statement best defines the permanent income hypothesis? Consumer spending depends on the level of disposable income that people expect to have over the course of their lifetime. When in a recession, although current consumer spending can be observed, future consumer spending cannot be predicted due to an unknown number of people leaving their temporary recession jobs for higher‑paying, permanent jobs that better fit their skills. Consumer spending depends on both the income and wealth of people in the economy. Consumer spending is proportional to the ratio of people in stable full‑time employment (that is, with "permanent" income) and people in unstable part‑time employment (that is, with "temporary" income). According to the permanent income hypothesis, which situations would result in an immediate increase in consumer spending, which would result in an immediate decrease in consumer spending,…With the theoritical of Permanent-Income Hypothesis in mind, explain how Friedman sought to reconcile the evidence about consumption from cross-sectional data with that from time series macroeconomic data?.
- 1. An implication under the Ricardian equivalence of debt-financed tax cut is that a. the tax cut will increase aggregate demand b. consumption will be unaffected c. result in increased investment d. none of the above 2. Economists who believe that the economy is inherently unstable, especially in the short run, would go more for a. passive economic policies b. active economic policies c. pro-cyclical policies d. rules more than discretion e. none of the above 3. According to the permanent-income hypothesis, an artist whose income fluctuates from year to year will: a. have a higher average propensity to consume in years of low income. b. have a lower average propensity to consume in years of high income c. have a constant average propensity to consume in all years. d. have a lower average propensity to consume during retirement. 4. In the Keynesian cross, if planned expenditure is below actual expenditure, we should expect a. households will reduce…use analytic exposition and an appropriate diagram, to explain how the permanent income theory of construction reconcile the results of cross- section and time -series estimates of the Keynesian consumption functionDirections: Read the following excerpts. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. Draw and label the change that would occur on the ADAS graph as a result of the policy action described in each. Identify what will happen as a result of the policy to the price level, employment, and real GDP. Excerpt from Public Law 111-5 of the 111th Congress: Signed into law by President Obama February 17, 2009 “Making supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and State and local fiscal stabilization. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. TITLE XII—Transportation, Housing and Urban Development, and Related Agencies …projects eligible for funding provided under this heading shall include, but not be limited to, highway or bridge projects eligible under title 23, United…
- In which of the following circumstances is expansionary fiscal p In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment? Explain.a. When the investment accelerator is large or when it is small?b. When the interest sensitivity of investment is large or when it is small?Directions: Read the following excerpts. Identify whether the policy action is fiscal or monetary and expansionary or contractionary. Draw and label the change that would occur on the ADAS graph as a result of the policy action described in each. Identify what will happen as a result of the policy to the price level, employment, and real GDP. Excerpt from Public Law 110-85 of the 110th Congress: Signed into law by President George W. Bush February 13, 2008 “To provide economic stimulus through recovery rebates to individuals, incentives for business investment, and an increase in conforming and FHA loan limits. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. Title I – Recovery Rebates and Incentives for Business Investment … Sec. 101. 2008 recovery rebates for individuals. Sec. 102. Temporary increase in limitations on expensing of certain depreciable business assets Sec. 103. Special allowance for certain property…Distinguish between demand-pull inflation and cost-push inflation. Which of the two types is most likely to be associated with a negative GDP gap? Which with a positive GDP gap, in which actual GDP exceeds potential GDP?
