In: Economics
How does the Life-Cycle Hypothesis resolve the puzzle of the Kuznet data?
By assuming that income shows a life-cycle variation, the Life-Cycle Hypothesis is able to explain why short term MPC falls with income, but long-term APC is constant. |
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By assuming that income is low in the early years and reaches a peak in late middle age and declines on retirement. |
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By smoothing consumption over a lifetime. |
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All of the above |
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None of the above |
By assuming that income shows a life-cycle variation, the Life-Cycle Hypothesis is able to explain why short term MPC falls with income, but long-term APC is constant.
Kuznets examined the utilization work utilizing time arrangement information. What's more, is inferred that there is no proof for APC to fall as pay increments. Rather APC stay consistent.