While Modigliani's LCH is similar to Friedman's PIH in several ways, it does differ in that it
A) assumes individuals base their consumption decisions on a time span greater than one year.
B) assumes that individuals prefer to maintain a stable consumption pattern.
C) attempted to reconcile the seemingly paradoxical cross-section and time-series empirical data.
D) gives an important role to assets as a determinant of consumption behavior.
D
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Which of the following curves reflects the idea that in the long run, output is determined only by the factors of production and given technology?
A) the aggregate demand curve B) the long-run aggregate supply curve C) the Keynesian aggregate supply curve D) the market supply curve
Jerry is interested in purchasing a washing machine. The price of the machine is $500. The probability that the machine will break down is 20% every year
If the machine breaks down in the first year and Jerry holds a warranty, he receives a new washing machine worth $400 that year. If the machine breaks down after two years and he holds a warranty, he receives a new machine that is worth $300 after the second year. The price of a warranty for two years is $100. The market interest rate is 5%. Is buying the warranty a good investment for Jerry? Explain your answer. Show all the necessary calculations.