Advertisement

The Life Cycle Hypothesis

  • Michael Szenberg
  • Lall Ramrattan
Chapter
  • 131 Downloads
Part of the Great Thinkers in Economics Series book series (GTE)

Abstract

Keynes’ consumption function, the absolute income hypothesis, revolutionized economics by shifting macroeconomic analysis from the supply side to the demand side. Total demand includes four major components relating to the household, business, government, and foreign sectors — the areas that have attracted varying degrees of scientific research since the post-WWII period. Modigliani’s life cycle hypothesis (LCH) contribution to macroeconomics fits in the domain of household consumption, the only component for which Keynes had advanced a psychological law that “men are disposed, as a rule and on the average to increase their consumption as their income increases, but not by as much as the increase in their income.”1

Keywords

Liquidity Constraint Current Income Consumption Function Permanent Income Income Ratio 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Copyright information

© Michael Szenberg and Lall Ramrattan 2008

Authors and Affiliations

  • Michael Szenberg
    • 1
  • Lall Ramrattan
    • 2
  1. 1.Pace UniversityNew YorkUSA
  2. 2.University of CaliforniaBerkeley ExtensionUSA

Personalised recommendations