What will occur if people base their spending decisions more on permanent income than on current income?
A) Consumption spending will be more responsive to a temporary change in income than a change in permanent income.
B) Shifts in aggregate supply will be less predictable than if spending is based on current income.
C) Consumption spending will fluctuate more widely than if such spending is determined by current income.
D) Attempts to fine-tune the economy with temporary tax rate adjustments will be less effective.
Correct Answer:
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