Which of the following events would likely cause the largest decrease in current consumption?
A) A one- time decrease in income (e.g. a bonus) of $4000.
B) A permanent decrease in annual salary of $2000.
C) A one- time tax increase of $4000.
D) Both A and C.
E) Both B and C.

Question

Quizplus · Accepted Answer

A permanent decrease in annual salary of $2000 would likely cause the largest decrease in current consumption because it affects the consumer's income stream indefinitely, leading to a more significant adjustment in consumption patterns compared to one-time changes.

Which of the Following Events Would Likely Cause the Largest