How consistent is the Keynesian consumption function with the random walk hypothesis?
What will be an ideal response?
For changes in aggregate income that are unexpected, the Keynesian consumption function captures the impact on current consumption. If economic behavior is guided by rational expectations, and there are no surprises, then aggregate income reflects all available information so, again, the Keynesian consumption function is a good model.
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Which of the following is not included in personal consumption?
A. Purchases of new construction by consumers B. Payments for cable and Internet services to homes C. New furniture and appliances bought by homeowners D. Food purchased at supermarkets
A country will not trade unless
A. It has an absolute advantage. B. Its balance of trade is in a surplus position. C. The production possibilities increase. D. The terms of trade are superior to domestic opportunities.