Which of the following is a feature of the 'Relative Income Hypothesis' of consumption associated with Duesenberry?
A. Consumption depends on an individual’s income relative to the incomes of others and on past peak income
B. Consumption is independent of social comparisons
C. Only permanent income matters
D. Consumption depends only on absolute current income
Answer: Option A
Solution (By JKSSB Mock Tests)
Duesenberry’s relative-income hypothesis posits that consumption depends on the individual’s rank in the income distribution and on the highest income previously attained (ratchet effect).
Explanation:
New Institutional Economics, associated with Coase, North and Williamson, analyses how institutions, property-rights structures and transaction costs shape economic behaviour and long-run performance.
Explanation:
PPP-based comparisons adjust for differences in price levels across countries, providing a better measure of real income and relative living standards.
No comments yet. Be the first to start the discussion!