Question from Past Macroeconomics Qualifying ExamEdit
Fall, 2004 - Question one - at George Mason University
Time series evidence suggests that consumption is proportional to income, with zero consumption at zero income. However, cross-section evidence suggests that consumption is positive even when income is zero.
- How does the Keynesian consumption function reconcile these two empirical facts?
- How does the Permanent Income model explain this apparent puzzle?
- Can the Life-Cycle theory of consumption explain this puzzle?
Which of these three theories has had the greater empirical success? Explain
|This macro-stub needs improving.|