Which of the following is a feature of the 'Ratchet Effect' in consumption theory? MCQ with Answer and Explanation

Question

Share Report Error

Which of the following is a feature of the 'Ratchet Effect' in consumption theory?

A. Only permanent income matters

B. Consumption falls symmetrically with income

C. Consumption rises with income but is resistant to falling when income declines

D. Consumption is independent of past income

Answer: Option C

Solution (By JKSSB Mock Tests)

The ratchet effect, associated with Duesenberry’s relative-income hypothesis, describes the asymmetry whereby consumption adjusts upward more readily than downward when income changes.

This question belongs to: Economy GK Economy Set 1

Request complete Subject PDF

Discuss this Question (0)

No comments yet. Be the first to start the discussion!

Practice More Economy Set 1 Questions

Question #1

Share Report

Which of the following is a characteristic of the 'Loss and Damage Fund' established under the UNFCCC?

A. A fund only for mitigation projects in developed countries

B. A private insurance mechanism without public finance

C. A fund to assist developing countries that are particularly vulnerable to the adverse effects of climate change in responding to loss and damage

D. A fund limited to adaptation within national borders of developed countries

View Answer & Solution Discuss

Get Complete Subject PDF for Economy GK

Correct Answer: Option C

Explanation:
The Loss and Damage Fund, agreed at COP27 and operationalised subsequently, is intended to provide financial assistance to developing countries that are especially vulnerable to climate-related loss and damage.

This question belongs to: Economy GK Economy Set 1