The Life Cycle Hypothesis Explains the Long Run Constancy of the Savings

question 74

Multiple Choice

The life cycle hypothesis explains the long run constancy of the savings rate and short run variability of savings rate provided

• A)the proportions of working and retired people are constant in each historical era.
• B)the saving behavior of each age group does not change from generation to generation.
• C)A and B are both required to explain the apparent contradiction.
• D)Friedman's PIH is in error.

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Definitions:

Offspring

The children or young born to a person, animal, or plant.

Maturation

Biological growth processes that enable orderly changes in behavior, relatively uninfluenced by experience.

Education

The process of facilitating learning or the acquisition of knowledge, skills, values, beliefs, and habits through various means.

Accommodation

In cognitive psychology, the process of modifying existing cognitive schemas, perceptions, and understandings to incorporate new information.