The fundamental lesson of the Life Cycle and Permanent Income hypotheses is that individuals smooth their consumption patterns over their lifetime.

Question

Quizplus · Accepted Answer

The Life Cycle and Permanent Income hypotheses both suggest that individuals aim to maintain a relatively constant standard of living over their lifetime, which leads them to smooth consumption patterns by borrowing or saving during periods of high or low income, respectively. Therefore, the statement is true.

The Fundamental Lesson of the Life Cycle and Permanent Income