How do the life cycle hypothesis and the permanent-income hypothesis resolve the apparent contradiction between the short run data, which suggests a non proportional relationship between consumption and income, and the long run data, which suggests a proportional relationship?

ENGR.ECONOMIC ANALYSIS
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How do the life cycle hypothesis and the
permanent-income hypothesis resolve the
apparent contradiction between the short
run data, which suggests a non
proportional relationship between
consumption and income, and the long
run data, which suggests a proportional
relationship?
Transcribed Image Text:How do the life cycle hypothesis and the permanent-income hypothesis resolve the apparent contradiction between the short run data, which suggests a non proportional relationship between consumption and income, and the long run data, which suggests a proportional relationship?
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