Which of the following is a feature of the 'Life-Cycle' and 'Permanent-Income' hypotheses taken together?
A. Both assume infinite horizons only
B. Both ignore the role of wealth
C. Both emphasise that consumption depends on long-run resource constraints rather than current income alone
D. Both claim that only current income matters
Answer: Option C
Solution (By JKSSB Mock Tests)
Both the life-cycle hypothesis and the permanent-income hypothesis assert that forward-looking consumers base consumption on expected lifetime or permanent resources rather than on current income alone.
Explanation:
The matching function in search-and-matching models describes how the flow of new hires depends on the number of unemployed workers and the number of job vacancies.
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