Which of the following statements about consumption and investment is correct?
A) A temporary change in income will have a relatively larger effect on consumption than on investment.
B) A permanent change in income will have a relatively larger effect on consumption than on investment.
C) Consumption is more volatile than investment.
D) Investment and consumption exhibit approximately the same degree of volatility.
E) Investment is more volatile than consumption.

Question

Quizplus · Accepted Answer

Investment is generally more volatile than consumption because it is more sensitive to economic conditions, interest rates, and business expectations. While both consumption and investment can fluctuate with economic cycles, investment tends to react more sharply to changes in the economic environment, leading to greater volatility.

Which of the Following Statements About Consumption and Investment Is