When future income rises, current consumption:
A)falls.
B)falls
C)rises
D)rises.
E)is unaffected
F)is unaffected.
G)is autonomous
H)is autonomous.

Question

Quizplus · Accepted Answer

When future income rises, current consumption also tends to rise. This relationship between current consumption and future income is described as the permanent income hypothesis. Consumers view their current consumption decisions in light of their expected future income, and as a result, a rise in expected future income will lead to a rise in current consumption.

When Future Income Rises, Current Consumption