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74. according to which of the following hypothescs, consumption is irreversible? (1) absolute income hypothesis (2) relative income hypothesis (3) permanent inc
74. According to which of the following hypothescs, consumption is irreversible? (1) Absolute Income Hypothesis (2) Relative Income Hypothesis (3) Permanent Income Hypothesis (4) Life Cycle Hypothesis (1) Ar 3 vREYA (3) T 34T uRHTHI (4) tta5 uTAT 75. Starting from an initial equilibrium in the IS-LM model, how would you model 75. the effects of a stock market boom that increased autonomous consumntion and contractionary monetary policy that sougit tO prevent inflation? (11 The IS curve would ohiftto the left and the LM curve would shift to the left h (2) The 1S curve would shift to the right an (31 The IS curve would shift to the left and the LM curve would shift to the riaht and the LM curve would shift to the left rig (4) The IS curve would shift to the right and the LM curve would shift to the right
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Nidhi taparia Best Answer
74. The answer is (2). Relative income hypothesis propounded by Duesenberry, explicitly states that consumption is irreversible. This way it seeks to resolve the paradox in Absolute Income Hypothesis that even when income levels changed a lot, consumption did not. Relative income hypothesis states that current consumption depends on relative income and not absolute. It shows short run consumption function and long run consumption function.
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Nidhi taparia![best-answer]()
75. The answer is (2). When consumption spending rises, IS curve shifts to the right. In case of a contractionary monetary policy, LM curve shifts to the left.