The permanent income hypothesis implies that young consumers with no savings and low income will fund permanent consumption by:
A)borrowing.
B)dissaving.
C)saving.
D)not paying taxes.

Question

Quizplus · Accepted Answer

According to the permanent income hypothesis, consumers base their consumption decisions on their expected permanent income rather than their current income. Therefore, young consumers with low income and no savings are likely to fund their permanent consumption by borrowing, as they expect their income to increase in the future.

The Permanent Income Hypothesis Implies That Young Consumers with No