Economics · Macroeconomics
According to Milton Friedman's Permanent Income Theory of Consumption, what is the functional relation between permanent consumption and permanent income? Where: YP = Permanent Income CP = Permanent Consumption K = The proportion of permanent income which is consumed
- 1CP = KYP✓
- 2YPCP = K
- 3CPYP = K
- 4YP = KCP
Correct answer
CP = KYP
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