Modigliani's consumption function differs from both Friedman's and Keynes' function in which of the following?
A)It is based on forward looking expectations.
B)It is based on disposable income received over time.
C)It is based on the value of assets accumulated over time.
D)It is based on disposable income or permanent income.

Question

Quizplus · Accepted Answer

Modigliani's consumption function, part of the Life-Cycle Hypothesis, emphasizes that consumption at any given time is based on the value of assets accumulated over time, rather than just current income. This contrasts with Keynes, who focused on current income, and Friedman, who introduced the concept of permanent income affecting consumption.

Modigliani's Consumption Function Differs from Both Friedman's and Keynes' Function