According to the life-cycle model, when wealth and income increase together in the long run, the average propensity to consume.
A) increases
B) decreases
C) remains constant
D) can either increase or decrease

Question

Quizplus · Accepted Answer

The life-cycle model suggests that individuals plan their consumption and savings behavior over their lifetime. When both wealth and income increase proportionally, the average propensity to consume remains constant as individuals adjust their consumption to maintain a stable consumption pattern over time.

According to the Life-Cycle Model, When Wealth and Income Increase