According to the life-cycle model, the short-run consumption function will not continue to hold in the long run because:
A) increases in wealth shift the short-run function upward.
B) decreases in the average propensity to consume shift the short-run function downward.
C) increases in income shift the short-run function upward.
D) increases in the average life span shift the short-run function upward.

Question

Quizplus · Accepted Answer

In the life-cycle model, as individuals accumulate wealth over time, their consumption patterns change, leading to an upward shift in the short-run consumption function. This reflects the idea that wealthier individuals tend to consume more, altering the relationship between income and consumption in the long run.

According to the Life-Cycle Model, the Short-Run Consumption Function Will