Life cycle theory of consumption postulates that (A) Consumption is constant throughout lifetime. (B) Marginal propensity to consume out of permanent income is small. (C) Marginal propensity to consume out of transitory income is large. (D) It emphasizes how to maintain a stable standard of living over the course of life.
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Consumption and investment has come up 74 times in 7 exams since 2005.
This question is on Relative income, permanent income and life-cycle hypotheses, part of Consumption and investment in Macroeconomics.
Why consumption reacts less than one-for-one to temporary income changes.
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Question from the CUET-PG 2025 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.