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Unformatted text preview: nd a decrease in future taxes
E) a decrease in current taxes and an increase in future taxes 16) 17) In response to a permanent increase in government spending, the permanent income hypothesis
would suggest that, to a first approximation,
A) lifetime wealth of the representative consumer rises.
B) real wages rise.
C) lifetime wealth of the representative consumer falls.
D) employment falls.
E) the consumption of leisure rises. 17) 18) The assumption that current - period consumption demand is positively related to the real interest
rate is justified as long as the
A) substitution effect dominates the income effect.
B) representative consumer is a lender.
C) representative consumer is a borrower.
D) income effect and substitution effects are equal.
E) income effect dominates the substitution effect. 18) 3 19) An increase in lifetime wealth is likely to
A) increase current labour supply and increase current consumption demand.
B) decrease current labour supply and increase current leisure.
C) decrease current labour supply and d...
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This document was uploaded on 02/24/2014 for the course ECON 2152 at UWO.
- Spring '13