Franco Modigliani's Answer to Simon Kuznets's Puzzle Regarding Long-Term Constancy

question 53

Multiple Choice

Franco Modigliani's answer to Simon Kuznets's puzzle regarding long-term constancy of the average propensity to consume is that:

• A) the average propensity to consume depends on the wealth-to-income ratio, and income and wealth tend to grow together over time.
• B) both rich and poor individuals have the same average propensity to consume.
• C) demographic shifts have acted to just cancel out movements in the average propensity to consume.
• D) every consumer consumes all of his or her income over a lifetime, so the average propensity to consume is constant at one.

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