The fact that consumption exhibits "excess sensitivity" implies that consumption
A)responds too strongly to predictable changes in income
B)responds too little to predictable changes in income
C)responds too little to surprise changes in income
D)is never affected by liquidity constraints
E)never behaves as Keynes predicted

Question

Quizplus · Accepted Answer

"Excess sensitivity" means that changes in consumption are greater than changes in income. This implies that consumption responds too strongly to predictable changes in income. Therefore, the best choice is A.

The Fact That Consumption Exhibits "Excess Sensitivity" Implies That Consumption