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

Question

Quizplus · Accepted Answer

The permanent income hypothesis suggests that consumers base their consumption decisions on their permanent income, which is their expected average income over their lifetime. Retirees, who have savings but no income, can fund excess permanent consumption by dipping into their savings, which is known as dissaving.

The Permanent Income Hypothesis Implies That Retired Consumers with Savings