According to the permanent income hypothesis,the impact of ________.
A)a change in permanent income on consumption is greater than the impact resulting from a change in transitory income
B)a change in transitory income on consumption is greater than the impact resulting from a change in permanent income
C)a change in transitory income is felt primarily through changes in the total tax revenue paid to the federal government
D)a change in permanent income on consumption is larger than the impact resulting from a change in future income

Question

Quizplus · Accepted Answer

The permanent income hypothesis posits that individuals base their consumption decisions on their expected long-term or "permanent" income rather than short-term or "transitory" fluctuations in income. Therefore, a change in permanent income has a greater impact on consumption than a change in transitory income.

According to the Permanent Income Hypothesis,the Impact of ________