Suppose that Congress passes a law to permanently cut taxes starting the next year. Assuming that consumers are not Ricardian, when would consumers adjust their consumption spending according to:
a. the Keynesian consumption function?
b. the Fisher two-period model with binding borrowing constraints?
c. the random-walk hypothesis (the permanent-income hypothesis with rational expectations) with no binding borrowing constraint?

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The Answer of Suppose that Congress passes a law to permanently cut taxes starting the next year. Assuming that consumers are not Ricardian, when would consumers adjust their consumption spending according to:
a. the Keynesian consumption function?
b. the Fisher two-period model with binding borrowing constraints?
c. the random-walk hypothesis (the permanent-income hypothesis with rational expectations) with no binding borrowing constraint?

Suppose That Congress Passes a Law to Permanently Cut Taxes