Homework Help: economics PLEASE HELP

Posted by tony on Monday, December 20, 2010 at 11:20pm.

According to the permanent hypothesis, households will tend to react to a temporary tax cut by:

A. assuming the new tax level will be permanent.
B. saving most of the additional disposable income.
C. increasing consumption sharply in response to the higher disposable income.
D. temporarily increasing their magical propensity to consume

I'm stuck between B and D. any helpp?

economics PLEASE HELP - Ms. Sue, Tuesday, December 21, 2010 at 10:54am
Check this article.

http://www.economyprofessor.com/economictheories/permanent-income-hypothesis.php

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