According to the Permanent-Income Theory, If Individuals a and B

question 30

Multiple Choice

According to the permanent-income theory, if individuals A and B have the same average annual income but A's income fluctuates greatly from year to year while B receives an almost even flow of income each year, then

• A)A will spend less than B out of permanent income
• B)B will spend less than A out of permanent income
• C)A will weigh current income less heavily in making consumption decisions than B
• D)B will weigh current income less heavily in making consumption decisions than A
• E)A's consumption will always be less than B's

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