Reference no: EM132855883

Problem 1: The idea that changes in consumption are unpredictable because all known information is already taken into account when current consumption decisions are made is known as

Option 1: the permanent-income hypothesis.
Option 2: the life cycle model of consumption.
Option 3: the random walk view of consumption.
Option 4: diminishing marginal utility of consumption.

Problem 2: The limited rationality of economic agents

Option 1: motivates individuals to place less emphasis on current consumption.
Option 2: motivates individuals to place more emphasis on current consumption.
Option 3: motivates limited borrowing.
Option 4: motivates excessive saving.