Economists have proved that a substantial increase in income during a month does not affect consumption much in the short run unless it is perceived as a permanent increase.

Question

Quizplus · Accepted Answer

This statement is true. Known as the permanent income hypothesis, it suggests that consumers base their spending decisions on their long-term average income rather than short-term fluctuations. Therefore, a temporary increase in income may not significantly impact their consumption behavior.

Economists Have Proved That a Substantial Increase in Income During