Overview

permanent income hypothesis


Show Summary Details

Quick Reference

The hypothesis that the level of consumption depends upon the level of permanent income. The implication of the permanent income hypothesis is that the flow of consumption over time will be smooth even if the flow of income is not. Expressed alternatively, income can be viewed as having a permanent component and a transitory component. Consumption will only respond to changes in the permanent component and not to changes in the transitory component.

Subjects: Economics.


Reference entries

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.