Ayushi Asked a Question
August 11, 2020 12:22 pmpts 30 pts
ne ie cycle hypothesis on consumption behavior suggests that people at various stages of the life cycle (1) spend everything they earn so saving ends up at zero (2) increase their marginal propensity to consume as income increases 3) decrease their marginal propensity to consume as income increases (4) have differing MPCs, which is still consistent with a constant MPC for the economy
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  • Nidhi taparia Best Answer
    Option (4) is correct. In the lifecycle hypothesis of consumption, consumer's mpc remains constant in the long run, but may vary slightly in the short run.
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