How does the permanent income hypothesis affect the multiplier model? Why?

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Macroeconomics

ISBN: 978-1259663048

10th edition

Authors: David C. Colander

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Question Posted: Dec 05, 2018 06:33 AM

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If the permanent income hypothesis is true, why would inequality measured by current consumption tend to be smaller than inequality measured by current income?
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How does the permanent income hypothesis affect the multiplier model? Why?

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If it is true that people base their spending primarily on lifetime income not yearly i...View the full answer

Macroeconomics

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