The Permanent-Income Theory of Consumption Asserts That People Prefer a Stable

Multiple Choice

The permanent-income theory of consumption asserts that people prefer a stable level of consumption throughout their lives and

A) will forego temporary or transitory opportunities to obtain higher income and consumption
B) calculate their level of consumption from the information they have regarding their average expected lifetime income
C) will only change their consumption behavior significantly if there is a transitory change in their income
D) this implies that the short-run mpc is greater than the long-run mpc
E) therefore always save the same fraction of their current income