The Permanent-Income Theory of Consumption Asserts That People Prefer a Stable

question 47

Multiple Choice

The permanent-income theory of consumption asserts that people prefer a stable level of consumption throughout their lives and

• A)will forego temporary or transitory opportunities to obtain higher income and consumption
• B)calculate their level of consumption from the information they have regarding their average expected lifetime income
• C)will only change their consumption behavior significantly if there is a transitory change in their income
• D)this implies that the short-run mpc is greater than the long-run mpc
• E)therefore always save the same fraction of their current income

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Definitions:

Middle-income

refers to individuals, families, or countries that fall between the economic classification of poor and wealthy, often characterized by moderate living standards and financial stability.

High-income

Refers to individuals or households that earn significantly above the average income level.

Child Support

Financial contributions required by law or court order to be paid by a non-custodial parent to support their children's upbringing.

Abuse Charges

Legal accusations involving the improper treatment or harm of another, encompassing physical, sexual, emotional, or psychological mistreatment.