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

The correct answer is C) Transitory versus permanent income because this concept involves adjusting for temporary changes in income, such as through saving or borrowing, to maintain a certain lifestyle or consumption level. This adjustment can obscure the true level of inequality by not accurately reflecting long-term income disparities.

Suppose That a Family Saves and Borrows to Buffer Itself