If Claudette gets a permanent increase in her income of $1000 per year,she saves an extra $200 this year and consumes an extra $800 this year.If the increase in income had been temporary instead of permanent,she would have saved ________ of the extra income.

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Quizplus · Accepted Answer

When an increase in income is perceived as temporary, individuals are more likely to save a larger portion of it, compared to when the increase is seen as permanent. In Claudette's case, since she saved $200 out of a $1000 increase in income when it was permanent, she would likely save more than $200 if she viewed the increase as temporary, anticipating that her future income would not be as high.

If Claudette Gets a Permanent Increase in Her Income of $1000