(a) Explain Keynes' three conjectures about the consumption function. Describe the evidence that is consistent with these conjectures and the evidence that is inconsistent with them. (b) Compare and contrast the Life Cycle Hypothesis with the Permanent Income Hypothesis. Which of these two hypotheses do you think deals more satisfactorily with the well known "consumption puzzle"? Explain.
(a) Explain Keynes' three conjectures about the consumption function. Describe the evidence that is consistent with these conjectures and the evidence that is inconsistent with them. (b) Compare and contrast the Life Cycle Hypothesis with the Permanent Income Hypothesis. Which of these two hypotheses do you think deals more satisfactorily with the well known "consumption puzzle"? Explain.
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter10: Keynesian Macroeconomics And Economic Instability: A Critique Of The Self Regulating Economy
Section: Chapter Questions
Problem 7QP
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Question
(a) Explain Keynes' three conjectures about the consumption function. Describe
the evidence that is consistent with these conjectures and the evidence that is
inconsistent with them.
(b) Compare and contrast the Life Cycle Hypothesis with the Permanent
Income Hypothesis. Which of these two hypotheses do you think deals more
satisfactorily with the well known
"consumption puzzle"? Explain.
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