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Q. |
There are strong theoretical reasons to expect that changes in wealth are responsible for changes in consumption. Nonetheless, one reason that we observe a tight link between consumption and disposable income is... |
A. | credit rationing which changes the intertemporal budget constraint for borrowers. |
B. | households attempt to smooth their consumption. |
C. | household saving provides a buffer between income and expenditure. |
D. | ricardian equivalence. |
Answer» A. credit rationing which changes the intertemporal budget constraint for borrowers. |
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