Under permanent income hypothesis, if permanent income increases, then
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1 mark, −0.33MacroeconomicsConsumption and investmentRelative income, permanent income and life-cycle hypothesesModerateabout 1 min
UoH 2011 Question 16: Consumption and investment
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Consumption and investment has come up 74 times in 7 exams since 2005.
What this question tests
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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