The Fundamental Lesson of the Life-Cycle and Permanent-Income Hypotheses Is

question 13

Multiple Choice

The fundamental lesson of the life-cycle and permanent-income hypotheses is that:

• A) individuals smooth their consumption patterns over their lifetimes.
• B) individuals vary their consumption patterns over their lifetimes.
• C) individuals' consumption patterns vary as their incomes change.
• D) individuals' consumption changes with changes in their temporary incomes.
• E) taxes are ineffectual.

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Definitions:

Row-equivalent

Relating to matrices, where one matrix can be transformed into another by a series of row operations.

Matrix

A rectangular array of numbers or functions arranged in rows and columns, used in mathematical and scientific calculations.

Determinant

A scalar value that can be computed from the elements of a square matrix and encodes certain properties of the matrix, such as whether it has an inverse.

Minors

In the context of matrices, minors are the determinant of the square matrices obtained by deleting one row and one column from a larger square matrix.