With the aid of a diagram show that according to the relative income hypothesis, the short-run...
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With the aid of a diagram show that according to the relative income hypothesis, the short-run average propensity to consume is greater than the long-run average propensity to consume. (10 marks) Explain why changes in consumption are unpredictable if consumers obey the permanent income hypothesis and have rational expectations. (6 marks) (4 marks) Explain the main propositions of the life cycle hypothesis. With the aid of a diagram show that according to the relative income hypothesis, the short-run average propensity to consume is greater than the long-run average propensity to consume. (10 marks) Explain why changes in consumption are unpredictable if consumers obey the permanent income hypothesis and have rational expectations. (6 marks) (4 marks) Explain the main propositions of the life cycle hypothesis.
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The diagram shows that the shortrun average propensity to consume APC is higher than the longrun ave... View the full answer
Related Book For
Introductory Econometrics A Modern Approach
ISBN: 978-0324660548
4th edition
Authors: Jeffrey M. Wooldridge
Posted Date:
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