Question:
The permanent income hypothesis was propounded by:
The permanent income hypothesis was propounded by:
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Permanent Income Hypothesis was given by Milton Friedman. Life Cycle Hypothesis is associated with Modigliani and Brumberg.
Updated On: May 22, 2026
- Dussenbery
- Brumberg
- Modigliani
- Friedman
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The Correct Option is D
Solution and Explanation
Concept: The Permanent Income Hypothesis explains consumption behaviour. It says that people base their consumption not only on current income, but on expected long-term or permanent income.
Step 1: Understanding permanent income.
Permanent income means the normal or long-run expected income of an individual. \[ \text{Permanent Income} = \text{Expected long-term income} \]
Step 2: Understanding consumption behaviour.
According to this hypothesis, people try to keep consumption stable over time. Temporary changes in income do not change consumption as much as permanent changes.
Step 3: Identifying the economist.
The Permanent Income Hypothesis was developed by Milton Friedman. Therefore, the correct answer is Friedman.
Step 1: Understanding permanent income.
Permanent income means the normal or long-run expected income of an individual. \[ \text{Permanent Income} = \text{Expected long-term income} \]
Step 2: Understanding consumption behaviour.
According to this hypothesis, people try to keep consumption stable over time. Temporary changes in income do not change consumption as much as permanent changes.
Step 3: Identifying the economist.
The Permanent Income Hypothesis was developed by Milton Friedman. Therefore, the correct answer is Friedman.
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