If we compare the life-cycle theory of consumption with the permanent-income theory we can conclude that they both
A)pay careful attention to microeconomic foundations
B)agree that temporary tax cuts can be used to stimulate the economy
C)have similar theoretical bases but disagree widely in their policy implications
D)explain why large changes in current income cause large changes in current consumption
E)none of the above

Question

Quizplus · Accepted Answer

Both the life-cycle theory of consumption and the permanent-income theory are based on microeconomic foundations, which means that they consider individual behavior and decision-making when analyzing consumption patterns.

If We Compare the Life-Cycle Theory of Consumption with the Permanent-Income