The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the

Question

Quizplus · Accepted Answer

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the permanent income hypothesis. This theory suggests that individuals will adjust their consumption patterns based on their expectations of their long-term or permanent income, rather than just their short-term or temporary income. Therefore, if someone receives a permanent increase in income, they are more likely to increase their consumption levels than if they only receive a temporary increase in income.

The Idea That a Permanent Increase in Income Causes a Larger