Economics Principles For A Changing World
Economics Principles For A Changing World
4th Edition
ISBN: 9781464186660
Author: CHIANG, Eric P.
Publisher: Worth Publishers,
Question
Book Icon
Chapter 15, Problem 1QP
To determine

The most equally distributed type of income.

Expert Solution & Answer
Check Mark

Explanation of Solution

Yes, the life cycle income is more equally distributed than the transitory income. This is because when an individual joins an employment after studies, the initial level of salary will be lower and as and when he moves on with experience, his salary also increases. It will reflect on the annual income, which is lower at the younger periods and higher in the elder periods.  Thus, people have temporarily high or low income, and this means that the annual income does not represent the true inequality in the living standards. This means that the distribution of income over the life time will be more equal than the income at a specific period.

Economics Concept Introduction

Life-cycle theory: Life cycle theory developed by Franco Modigliani and Richard Brumberg relates to the spending and saving habits of an individual to the course of their life time.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education