In the field of economics, the observation that the living standard of a household is more stable than its income, because people think in terms of their long-term earnings as they spend, is known as:

Question

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The observation described in the question is known as the permanent income hypothesis, which states that individuals base their consumption decisions on their expected long-term income rather than their current income. This leads to a more stable living standard than income fluctuations would suggest.

In the Field of Economics, the Observation That the Living