Milton Friedman in his book on consumption function, discussed the importance of _____, rather than _____, to understand consumer spending.
A)savings;expenditure
B)permanent income;current income
C)money supply;real output
D)wages;savings
E)real output;prices

Question

Quizplus · Accepted Answer

Milton Friedman emphasized on the importance of permanent income, which is the expected average income over a long period, as opposed to current income, in understanding consumer spending. He argued that people base their consumption decisions on their expected future income rather than their current income. This is because people smooth out their consumption over their lifetime and therefore, their spending decisions are impacted by their long-term average income rather than their current income.

Milton Friedman in His Book on Consumption Function, Discussed the Importance