Gordon characterizes Modigliani as a prominent activist yet several implications of his life cycle hypothesis support the non-activists.One of these implications is
A)transitory increases in income associated with the business cycle are not expected to last a lifetime so current consumption is relatively stable.
B)permanent increases in income associated with the business cycle are not expected to last a lifetime so current consumption is relatively stable.
C)transitory increases in income associated with the business cycle are not expected to last a lifetime so current consumption is relatively unstable.
D)transitory increases in income associated with the business cycle are to last a lifetime so current consumption is relatively stable.

Question

Quizplus · Accepted Answer

The implication of the life cycle hypothesis that supports non-activism is that transitory increases in income associated with the business cycle are not expected to last a lifetime, so current consumption is relatively stable. This means that individuals are less likely to engage in activist behavior, such as saving or investing, in response to short-term fluctuations in income. As a result, individuals like Modigliani, who adhere to the life cycle hypothesis, may not be characterized as prominent activists.

Gordon Characterizes Modigliani as a Prominent Activist Yet Several Implications