The Distinction Between Current Income and Expected Future Income Is

question 110

Essay

The distinction between current income and expected future income is a critical distinction among the six theories of consumption. Which theories place greater emphasis on current income and which theories place greater emphasis on future expected income? Why does this distinction matter for economic policymakers?

---

Definitions:

Risk Management

The process of identifying, assessing, and controlling threats to an organization's capital and earnings.

Passive Investment

An investment strategy involving minimal buying and selling actions, typically focused on long-term investment in index funds and ETFs.

Target Date Fund

A mutual fund designed to adjust its asset allocation towards more conservative investments as it approaches a specific target date.

Variable Annuity

An insurance product that provides a retirement income and whose value fluctuates with the performance of the investment options chosen by the holder.