Friedman measured "permanent" income by assuming that people adjusted their consumption on the basis of

Question

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Friedman's concept of "permanent" income includes the idea that individuals adjust their consumption based on an adaptive expectation formation of their expected income, taking into account both transitory income and the level of income they expect to have over a period of years in the future. This encompasses an "error learning" process as part of adjusting expectations, making all the provided options correct components of his theory.

Friedman Measured "Permanent" Income by Assuming That People Adjusted Their