Which of the Following Is NOT Consistent with the Permanent

question 199

Multiple Choice

Which of the following is NOT consistent with the Permanent Income Hypothesis?

• A)The theory would predict that people's consumption would be greater than their income until their mid to late 20s
• B)A person who won the lottery would spend only a small part of their winnings in the first year
• C)Consumption is smaller than income when people reach old age
• D)People gear their consumption to their expected earnings more than to their current income

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