Multiple choice

Match the followings.

 
List - I
List - II
1. Absolute income hypothesis
(i) N.Gregorv Mankiw
2. Rational expectation hypothesis
(ii) T.M. Keynes
3. Relative income hypothesis
(iii) Robert Lucas
4. The New Keynesian model
(iv) James Duesenberty

  1. 1 - (iv), 2 - (iii), 3 - (ii), 4 - (i)

  2. 1 - (ii), 2 - (i), 3 - (iv), 4 - (iii)

  3. 1 - (ii), 2 - (iii), 3 - (iv), 4 - (i)

  4. 1 - (iii), 2 - (ii), 3 - (i), 4 - (iv)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The matching pairs consumption hypotheses with their economists: Absolute income hypothesis is Keynes (consumption depends on current income), Rational expectations hypothesis is Robert Lucas (agents form expectations using all available information optimally), Relative income hypothesis is James Duesenberry (consumption depends on others' income and past habits), and New Keynesian model is N. Gregory Mankiw (menu costs, price stickiness incorporating rational expectations). This covers the evolution of consumption theory from Keynesian fundamentals through to New Keynesian synthesis.

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