The permanent income hypothesis and credit constraints (15)

How would households respond to an announcement at time t of a decrease in income at time t+ 1. (a) If households were not credit constrained (b) In the presence of credit constraints (c) If saving were not possible (d) What is the relation between consumption and current income in (a), (b) and (c)? What are the implications of this for the marginal propensity to consume and the multiplier? (e) Does your answer change if the announcement is about an increase in income at time t + 1?

1. The permanent income hypothesis and credit constraints (15) How would households respond to an announcement at time t of a decrease in income at time t + 1. (a) If households were not credit constrained (b) In the presence of credit constraints (c) If saving were not possible (d) What is the relation between consumption and current income in (a), (b) and (c)? What are the implications of this for the marginal propensity to consume and the multiplier? (e) Does your answer change if the announcement is about an increase in income at time t + 1