Asked by Gabrielle Gwizdala on Jun 01, 2024
Verified
Most economists believe that a family bases its spending decisions on its transitory income.
Transitory Income
Income that is temporary or not consistent, such as bonuses, gifts, or any other earnings that are not regular or guaranteed.
- Interpret the effects of transitory vs. permanent income on household spending decisions.
Verified Answer
ZK
Zybrea KnightJun 07, 2024
Final Answer :
False
Explanation :
Most economists believe that a family bases its spending decisions on its permanent income, not its transitory income, as the permanent income hypothesis suggests. This theory posits that people will base their consumption on an estimate of their long-term average income.
Learning Objectives
- Interpret the effects of transitory vs. permanent income on household spending decisions.
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