The chapter suggests that people can use saving and borrowing to smooth out transitory variation in income

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The chapter suggests that people can use saving and borrowing to smooth out transitory variation in income in order to maintain steady consumption.

a What obstacles might prevent such smoothing?

b What does this tell you about whether it is appropriate to base measures of income inequality purely on permanent income?

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Principles Of Microeconomics [Australia And New Zealand Edition]

ISBN: 9781337408066

6th Edition

Authors: Joshua Gans, Stephen King, Martin Byford, N. Gregory Mankiw

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