One of the findings of studies in behavioral economics is that:
A) business cycles have no impact on consumption patterns.
B) Ricardian equivalence is more prevalent than previously thought.
C) transitory income has no effect on consumption.
D) consumption is more sensitive to current income changes than suggested by the permanent-income hypothesis.
E) people tend to put greater emphasis on future income than on current income.

Question

Quizplus · Accepted Answer

Studies in behavioral economics have shown that people's consumption is more responsive to changes in their current income than suggested by the permanent-income hypothesis, which assumes that people base their spending on their expected lifetime income. This finding suggests that people may have a tendency to be shortsighted and respond more to immediate financial circumstances than to long-term expectations.

One of the Findings of Studies in Behavioral Economics Is