Answer to Question #192397 in English for Elizabeth Mulingen

Question

(b)With a help of a diagram discuss how the permanent income theory of consumption

explains the difference between the cross-sectionandtime-series estimates of the

Keynesian aggregate consumption function.

Answer 1

the three most important theories of consumption are as follows: 1. Relative Income Theory of Consumption 2. Life Cycle Theory of Consumption 3. Permanent Income Theory of Consumption