Milton Friedman argued that, over long periods of time, the average propensity to consume is constant because, over these long periods of time:
A)the variation in income is dominated by the transitory component.
B)the variation in income is dominated by the permanent component.
C)it is the behaviour of the average consumer that dominates.
D)income averages out to a constant.

Question

Quizplus · Accepted Answer

Friedman argued that the permanent component of income, which is stable over time, dominates the variation in income, leading to a constant average propensity to consume.

Milton Friedman Argued That, Over Long Periods of Time, the Average