By the permanent-income hypothesis,the MPC of transitory income is
A)k.
B)j.
C)kj.
D)k - j.
E)0.

Question

Quizplus · Accepted Answer

The permanent-income hypothesis argues that individuals consume based on their long-term/permanent income, rather than their short-term/transitory income. Therefore, their marginal propensity to consume (MPC) out of transitory income would be zero, as any changes in transitory income would not significantly affect their long-term consumption patterns.

By the Permanent-Income Hypothesis,the MPC of Transitory Income Is