The Life-Cycle Hypothesis and the Permanent-Income Hypothesis Both Assume That

question 91

Multiple Choice

The life-cycle hypothesis and the permanent-income hypothesis both assume that consumers seek to:

• A) increase consumption during expansions.
• B) minimize consumption during recessions.
• C) increase consumption during retirement
• D) smooth consumption over their lifetimes.

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Definitions:

Capitalism

An economic system in which productive resources are owned privately and goods and resources are allocated through market prices.

Exchange

The act of giving one thing and receiving another (especially of the same type or value) in return, often referring to the trading of goods, services, or currencies.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.

Specialization

The process of concentrating on and becoming expert in a particular subject or skill within production or labor.