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August 12, 2020 2:05 pmpts 30 pts
40. The permanent income bypöthesis that establishes relationship between permanent income Bnd permanent consurnption 4rgues that the relationship depends on (1) Rate of interest, future expectations and taste & preference (2) Rate of interost, ratio of non human wealth to income and taste & pre- ference (3) Rate of interest, transitory income and taste & preference (4) Rate ofinterest, retum on human capital and taste & preference (1) , Te 6 FURNI, 33Ts ue u 41. According to the Keynesian model, equilibrium output of an economy may be less than the fuli-employment level of output because at full employment (1) Suficient îneome may not be generated tö keep workers above the subsis- tence level (2) There might not be enough demand by fims and consumers to buy that 0utput 3) Workers may not be willing to work the hours necessary to produce the Output (4) Interest rates might not be high enough to provide the incentive to finance the produetion
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    40. The answer is (2). According to the permanent income hypothesis, the relationship between permanant income and permanent consumption depends on rate of interest, ratio of non ...
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