Suppose that a family saves and borrows to buffer itself against changes in income. These actions relate to which problem in measuring inequality?
A)in-kind transfers
B)negative income tax
C)transitory versus permanent income
D)economic mobility

Question

Quizplus · Accepted Answer

This relates to the problem of distinguishing between temporary and permanent changes in income when measuring inequality. Saving and borrowing can reflect temporary changes in income, and therefore highlight the importance of considering transitory versus permanent income when analyzing inequality.

Suppose That a Family Saves and Borrows to Buffer Itself