Suppose that your annual income has averaged $20,000 for the past 10 years and that you expect it will average $20,000 over the next 10 years.If your income this year increases to $30,000 and you increase your consumption expenditures by $10,000, then you are most likely acting according to the

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The current income hypothesis suggests that consumption decisions are based on current income, rather than on permanent income or long-term average income. The increase in consumption expenditures based on a temporary increase in income is consistent with this hypothesis.

Suppose That Your Annual Income Has Averaged $20,000 for the Past