According to the Life Cycle and Permanent Income hypotheses,if future income rises permanently,current consumption:
A)falls.
B)rises.
C)does not change.
D)changes in proportion to interest rate changes.
E)Not enough information is given.

Question

Quizplus · Accepted Answer

According to both the Life Cycle and Permanent Income hypotheses, if future income rises permanently, current consumption will also rise as individuals expect to have higher income in the future and therefore can afford to spend more in the present.

According to the Life Cycle and Permanent Income Hypotheses,if Future