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:

Subjective Assessment

A method of evaluation based on personal opinions, perspectives, or feelings rather than objective measurements or criteria.

Intuitive Judgment

A judgment about the probability of an event based on integrating relevant evidence.

Frequency

The rate at which a repeating event occurs, such as the number of waves passing a point in one second.

Equal Alternatives

A scenario where all available options are considered to be of equal value or utility.