Economics · Consumption Theories
Assertion (A): According to Friedman's Permanent Income Hypothesis, the MPC out of transitory income is zero. Reason (R): Consumers consider transitory income as a windfall or temporary deviation from permanent income and choose to save it entirely rather than revise their permanent consumption plan.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A is false but R is true
- 2A is true but R is false
- 3Both A and R are true, but R is NOT the correct explanation of A
- 4Both A and R are true, and R is the correct explanation of A✓
Correct answer
Both A and R are true, and R is the correct explanation of A
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