With a temporary income tax surcharge,according to the ________,household consumption should ________.
A)LCH;stay the same since life cycles have not changed
B)LCH;rise even though disposable income falls
C)PIH;fall since disposable income falls
D)None of the above is correct since there would be no change in "permanent" income.

Question

Quizplus · Accepted Answer

The correct answer is D because both the Life Cycle Hypothesis (LCH) and the Permanent Income Hypothesis (PIH) suggest that temporary changes in income do not affect consumption significantly, as they do not alter the consumer's perception of their permanent income.

With a Temporary Income Tax Surcharge,according to the ________,Household Consumption