Asked by Gisella Perez on May 14, 2024
Verified
Many economists believe that a family bases its spending decisions on its permanent, or average, income rather than on transitory income.
Permanent Income
A person’s normal income.
Transitory Income
Income that is temporary or not expected to recur on a regular basis, affecting individuals' spending and saving decisions.
- Comprehend principles associated with individual earnings, including the comparison between average and temporary income, as well as the economic life cycle.
Verified Answer
SN
Shauna NadeauMay 15, 2024
Final Answer :
True
Explanation :
This concept is known as the Permanent Income Hypothesis, proposed by Milton Friedman, suggesting that people's consumption patterns are more influenced by their long-term average income rather than short-term fluctuations.
Learning Objectives
- Comprehend principles associated with individual earnings, including the comparison between average and temporary income, as well as the economic life cycle.