2. Explain how the permanent income theory changes the understanding of the factors affecting aggregate consumption...

 

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2. Explain how the permanent income theory changes the understanding of the factors affecting aggregate consumption in the economy, compared to a simple C = a + b(Y-T) relationship. How might this affect factors which can cause the IS curve to shift? 2. Explain how the permanent income theory changes the understanding of the factors affecting aggregate consumption in the economy, compared to a simple C = a + b(Y-T) relationship. How might this affect factors which can cause the IS curve to shift?

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The permanent income hypothesis PIH by Milton Friedman offers a different perspective on aggregate consumption compared to the simple Keynesian model ... View the full answer