John has $100,000 in annual income but does not own his house or a car.Bob has $100,000 in annual income and owns two houses and four cars.Which theorist would predict that John spends a different proportion of his current income than Bob?

Question

Quizplus · Accepted Answer

Milton Friedman's Permanent Income Hypothesis suggests that people spend money based on their expected long-term average income rather than their current income. Since Bob has more assets, he might perceive a higher permanent income, leading to different spending behavior compared to John.

John Has $100,000 in Annual Income but Does Not Own