Friedman's theory of consumption focuses on ?
Correct answer: D. permanent income
- A. Past income
- B. Current income
- C. Disposable income
- D. permanent income
Explanation
Friedman's permanent-income hypothesis states that consumption depends mainly on expected long-term or permanent income, not merely on current income. Temporary income changes therefore have a smaller effect on consumption.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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