in the 2-period consumption model, without liquidity constraints, consumers with a faster growth rate in income

a.

choices A and C.

b.

none of the above.

c.

have a higher level of consumption in all periods.

d.

have faster consumption growth but only if the IES is high.

e.

always have faster consumption growth across periods.

Consider the version of the Permanent Income model given by Hall's random-walk model of consumption.

According to it, compared to consumption in the previous period, current consumption

a.

is larger if there is an increase in current income that was already announced in a previous period.

b.

is necessarily the same because of consumption smoothing.

c.

choices C and E.

d.

is the same if past forecasts are now proved wrong.

e.

is larger if there if future increases in income become expected in the current period.