According to the Permanent Income Hypothesis

question 176

Multiple Choice

According to the permanent income hypothesis,

• A) a change in income regarded as permanent will have a greater impact on saving than on consumption.
• B) a change in income regarded as temporary will have a greater impact on saving than on consumption.
• C) regardless of whether a change in disposable personal income is permanent or temporary; people will change consumption by moving along the consumption function.
• D) a change in income regarded as temporary will not affect consumption much since it will have little effect on average lifetime income.

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