According to the permanent income hypothesis, a one-time tax rebate will generally have a considerable impact on consumption.

Question

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The permanent income hypothesis suggests that consumers base their consumption decisions on their expected long-term average income, rather than their current income. Therefore, a one-time tax rebate is not expected to have a significant impact on consumption as it is viewed as a temporary increase in income. Instead, a sustained increase in income is more likely to have a significant impact on consumption.

According to the Permanent Income Hypothesis, a One-Time Tax Rebate