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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