The life cycle hypothesis explains the long run constancy of the savings rate and short run variability of savings rate provided
A) the proportions of working and retired people are constant in each historical era.
B) the saving behavior of each age group does not change from generation to generation.
C) A and B are both required to explain the apparent contradiction.
D) Friedman's PIH is in error.
C
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If firms in a competitive industry independently operate to maximize profits, the ________ are eventually equalized across the firms
A) total costs B) marginal costs C) profits D) revenues
If labor costs rise at the same time that the federal government decreases its purchases, in the short run
A) aggregate output and the price level will both increase. B) aggregate output will increase, but the price level will fall. C) aggregate output and the price level will both fall. D) aggregate output will fall, but the price level may either increase or decrease.