Economics · Consumption Theories
Kuznets' Puzzle (Consumption Puzzle) refers to which contradictory empirical finding?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1MPC was found to be greater than APC in long-run time series data
- 2Long-run APC remained stable and showed no downward trend, contradicting Keynes' short-run finding that APC falls as income rises✓
- 3MPC was found to be negative in cross-sectional data
- 4Short-run and long-run consumption functions were found to be identical
Correct answer
Long-run APC remained stable and showed no downward trend, contradicting Keynes' short-run finding that APC falls as income rises
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