In the IS curve,consumption is represented as a constant fraction of __________,and,therefore,is __________ than current output.
A)potential output;more volatile
B)potential output;smoother
C)short-run fluctuations;smoother
D)short-run fluctuations;more volatile
E)none of the above

Question

Quizplus · Accepted Answer

Consumption is typically smoother than current output because it is based on potential output, which is less volatile than short-run fluctuations in actual output.

In the IS Curve,consumption Is Represented as a Constant Fraction