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In the context of the permanent income hypothesis, permanent consumption is:
  • a)
    Consumption determined by transitory income.
  • b)
    Consumption that varies with business cycles.
  • c)
    Consumption based on current income.
  • d)
    Consumption determined by permanent income.
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
In the context of the permanent income hypothesis, permanent consumpti...
Permanent consumption, as per the permanent income hypothesis, is determined by permanent income. It is the amount a household can consume while keeping its wealth intact, based on the present value of anticipated future income.
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In the context of the permanent income hypothesis, permanent consumption is:a)Consumption determined by transitory income.b)Consumption that varies with business cycles.c)Consumption based on current income.d)Consumption determined by permanent income.Correct answer is option 'D'. Can you explain this answer?
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