Reference no: EM132855886

Problem 1: Which of the following statements about aggregate consumption data is false?

Option 1: From 1970 to 2015, household debt as a fraction of U.S. GDP has generally been rising.
Option 2: From 1970 to 2015, the personal saving rate has generally declined in the United States.
Option 3: Recently, China's saving rate has been rising, which is consistent with predictions of the permanent-income hypothesis.
Option 4: From 1970 to 2015, U.S. households have generally increased their consumption.

Problem 2: Which of the following will have the largest increase on current consumption?

Option 1: An agent who obeys the permanent income hypothesis receives an expected salary bonus of one dollar.
Option 2: An agent who knows that taxes will increase one dollar in the future receives a tax break of one dollar in the current period.
Option 3: An agent is worried she will lose a dollar of income this period, so she engages in precautionary saving.
Option 4: An agent with a binding borrowing constraint unexpectedly finds a dollar on the floor.