5
QuizMultiple Choice

Monetary Policy: The Federal Reserve — Unit test

Question 5 • IL-Economics

Milton Friedman argued that consumers are more likely to alter their behavior based on

Answer
A
changes in the unemployment rate.
B
short-term changes in the economy.
C
long-term changes in the economy.
D
changes in the inflation rate.

Explanation

Friedman’s permanent income hypothesis says consumers base spending mainly on the income they expect to have over the long term. A temporary economic change is less likely to change their spending, while a lasting change can affect their expected permanent income. So the best answer is “long-term changes in the economy.”

AI-written and checked against the verified answer.

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