Using consumption theories based upon forward looking hypothesis,a temporary increase in government expenditures will have ________ impact on induced consumption.
A)a large multiple
B)a small multiple
C)a variable
D)no

Question

Quizplus · Accepted Answer

According to the forward-looking hypothesis, consumers base their current consumption decisions on expected future income rather than current income. A temporary increase in government expenditures is likely to be seen by individuals as a temporary increase in their future income, leading to a small multiple impact on induced consumption. This is because consumers will not significantly increase their spending unless they expect this increase in government expenditures to continue in the future.

Using Consumption Theories Based Upon Forward Looking Hypothesis,a Temporary Increase