Assume a household that consumption smooths. In response to a temporary negative shock, they will and in response to a permanent negative shock, they will O absorb the decline through savings and keep consumption largely unchanged, adjust their consumption downward significantly O increase consumption since things will get better, absorb the decline through reducing savings O increase consumption since things will get better, adjust their consumption downward significantly O adjust their consumption downward significantly, absorb the decline through savings and keep consumption largely unchanged O adjust their consumption downward significantly in both cases