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 claim that only current income matters
C. Both ignore the role of wealth
D. Both emphasise that consumption depends on long-run resource constraints rather than current income alone
Answer: Option D
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.
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