The LCH theory argues that
A)over time,the saving rate of low-income people tended to rise at a faster rate than that of other income groups.
B)the aggregate saving rate depended on the age distribution within the economy.
C)over time,the aggregate saving rate was relatively constant.
D)over time,the aggregate saving rate would increase.

Question

Quizplus · Accepted Answer

The Life Cycle Hypothesis (LCH) argues that the aggregate saving rate depends on the age distribution within the economy. Specifically, the LCH suggests that individuals will increase their saving rate over time as they age and approach retirement, which will lead to an overall increase in the aggregate saving rate. Therefore, option B is the most accurate statement. Option A is partially correct, but it only applies to low-income individuals and not the overall aggregate saving rate. Option C is not accurate, as the LCH predicts a change in the aggregate saving rate over time. Option D is not entirely correct, as the LCH does not suggest a constant increase in the aggregate saving rate, but rather a more complex pattern based on the age distribution within the economy.

The LCH Theory Argues That