The key difference between the Keynesian theory of consumption and the permanent income theory is that the permanent theory suggests that consumption and saving decisions are likely to be based not just on current income but on expectations of future income as well.

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The permanent income theory, proposed by Milton Friedman, posits that individuals base their consumption and saving decisions on their expectations of long-term average income, rather than just their current income, which is a key difference from the Keynesian consumption theory that focuses more on current income levels.

The Key Difference Between the Keynesian Theory of Consumption and the Permanent