The Smith family owns an apple orchard in Illinois.The Jones family owns an apple orchard in Wisconsin.A late frost destroys half of the Smith family's harvest for one year.For the Smith family,their

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Quizplus · Accepted Answer

The destruction of half of the Smith family's harvest due to a late frost is a transitory shock that affects their income for one year only. Permanent income, on the other hand, refers to the long-term average level of income that a family can expect. Since the frost is a temporary event, it is unlikely to significantly affect the Smith family's permanent income. Therefore, the permanent income of the Smith family is likely to be higher than their transitory income for the year of the frost.

The Smith Family Owns an Apple Orchard in Illinois