The Permanent Income and Life-Cycle Hypothesis Imply That

question 21

Multiple Choice

The Permanent Income and Life-Cycle Hypothesis imply that

• A)consumers generally favor current consumption over future consumption.
• B)the primary determinant of current consumption is permanent income.
• C)the primary determinant of permanent income is current consumption.
• D)consumers are more likely to save if they are uncertain about the future.

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Definitions:

Regressive Tax

A tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases.

Regressive Income Tax

A tax system where the tax rate decreases as the taxable amount increases, placing a higher relative burden on low-income earners.

Efficiency

The optimal allocation of resources to ensure the best possible outcome or output.

Equity

Refers to fairness and justice in the distribution of resources and opportunities.