The Hypothesis That Individuals Base Consumption on Their Expected Long

question 58

Multiple Choice

The hypothesis that individuals base consumption on their expected long run average income is the

• A)life cycle hypothesis.
• B)forward looking expectation hypothesis.
• C)permanent-income hypothesis.
• D)None of the above.

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Definitions:

Insurance Market

A market where individuals or entities can transfer or share risk by purchasing insurance policies from insurers, who assume the risk in exchange for premiums.

Diversification

A strategy used in investing or business to spread risks by allocating resources across different assets, products, or markets.

Expected Gain

The anticipated benefit or profit from an investment or action.

Diversification

A strategy of investing in a variety of assets to reduce overall risk.