If people regard economic fluctuations as temporary,
A) spending will be less sensitive to changes in income,and the multiplier will be larger.
B) spending will be less sensitive to changes in income,and the multiplier will be smaller.
C) they will be pessimistic about the future.
D) spending will be more sensitive to changes in income.
E) spending will be independent of changes in income.

Question

Quizplus · Accepted Answer

If people regard economic fluctuations as temporary, they are less likely to change their spending habits in response to changes in income. This means that spending will be less sensitive to changes in income and the multiplier will be smaller.

If People Regard Economic Fluctuations as Temporary